Contracts are the backbone of many business transactions and relationships. Their clear legal framework outlines rights and obligations, bolstering confidence in both domestic and international business dealings.
When contractual obligations are not upheld, a breach of contract occurs, raising serious legal implications. A reputable law firm should be ready to advocate for clients in resolving such disputes through alternative Thailand dispute resolution processes or judicial proceedings.
Defining a Breach
The legal system in Thailand supports contractual integrity and enforceable agreements by providing clear guidelines for contractual relationships. The principles of freedom of contract, good faith, and pacta sunt servanda define the framework that governs contractual rights and obligations. Detailed provisions on contract formation, interpretation, and available remedies for breach support contractual certainty for both domestic and international business.
The most common remedy for breach of contract in Thailand is monetary compensation, also known as damages. These damages aim to place the non-breaching party in a position they would have been had the breach not occurred, compensating them for losses that could have been prevented or mitigated. In some cases, the breaching party may be required to pay stipulated or liquidated damages, pre-agreed amounts that avoid lengthy litigation over calculating exact losses.
In rare instances, the breaching party may be required to perform specific or defective performance or rescind the contract altogether. These remedies are used when the breaching party’s failure to fulfill substantial obligations ruins the core purpose of the contract, rendering its objectives impossible to achieve.
Careful contract drafting and regular legal reviews reduce the risk of breaches, but even the most well-intentioned business can run into unexpected challenges. In these circumstances, a Thai-qualified attorney can quickly help you understand your options and take steps to address any issues.
Damages
The legal framework of contracts in Thailand offers a robust set of informal and formal avenues for dispute resolution. However, successful resolution depends on thorough preparation and the guidance of a lawyer who has familiarity with contract law in Thailand.
A contractual agreement establishes a relationship and creates duties and responsibilities for the parties involved. Failure to meet these obligations may result in breach of contract. Such breaches can have serious financial consequences for both businesses and individuals.
Like most legal jurisdictions, Thailand recognizes a breach of contract when a party fails to perform their contractual duties and responsibilities. Such failures include non-performance, defective performance and fundamental breach. Non-performance refers to a failure to fulfil substantial obligations under the contract, while defective performance involves supplying inferior goods or services. Fundamental breach involves the undermining of the core purpose of the contract.
The injured party can pursue damages resulting from the breach of contract. These damages may be direct or consequential and can encompass a broad range of losses, including lost profits. The courts apply a but-for test and foreseeability principle to award such damages. Some contracts also contain liquidated damages clauses, which pre-define an amount payable upon breach. However, such amounts are not automatically enforceable and the court can reduce them if they are found to be excessive.
Rescission
Contracts weave the fabric of commerce in Thailand binding parties to their responsibilities and serving as the cornerstone for business transactions. When breached, contracts can have significant legal ramifications. Understanding the legal landscape, prevalent forms of breach and established remedies can help individuals and businesses prevent and navigate contract-related disputes.
To be enforceable, a contract must meet three criteria: Offer and Acceptance, Consideration and Intention to Create Legal Relations. An offer must be specific and unqualified to constitute an agreement; consideration must be exchanged for the promise; and both parties must intend to enter into a legally binding contract. If any of these conditions are not met, the contract will be void.
In the event of a breach, damages may be awarded to compensate the non-breaching party for losses incurred as a result of the breach. Other remedies include rescission or specific performance. While rescission cancels the contract, specific performance can be used to compel the breaching party to fulfill their contractual obligations under a different arrangement.
While careful drafting and proactive legal review can reduce the risk of a breach, even the best laid plans can be disrupted by outside factors. A swift response and the guidance of a firm familiar with Thai legal nuances can turn a discordant melody into a harmonious resolution, preserving your business’s integrity.
Litigation
Contracts are the cornerstone of many business transactions and relationships, establishing a clear legal framework that outlines rights and obligations. But, when a breach occurs, it can have significant financial and reputational implications. In Thailand, as in other legal jurisdictions, resolving a breach of contract dispute often requires litigation. A seasoned Thai lawyer who is well-versed in the country’s legal landscape, common forms of breach, and available remedies can help clients navigate this process and protect their interests.
Monetary compensation is the most common remedy for breach of contract in Thailand. This may include restitution for direct costs (e.g., loss of profits) as well as indirect costs resulting from the breach. Moreover, a court may award liquidated damages, which are pre-agreed amounts established in the contract, if it finds that a breach is material or goes to the core of the agreement. In some cases, a court may terminate the contract or release the breaching party from further obligations.
Arbitration is another method of resolving breach of contract disputes in Thailand. However, before initiating arbitration proceedings, it is important to disclose any circumstances that could cast doubt on the impartiality or independence of an arbitrator, as failure to do so may disqualify a claim and render the award unenforceable. In addition, it is essential to comply with all statutory and regulatory requirements.
