Breach of Contract is a common issue that can disrupt personal and business agreements. Having a thorough understanding of the legal framework, types of breaches, and available remedies and resolution methods will allow individuals and businesses to navigate these disputes with confidence.
Clear contractual terms, open communication, and efficient Thailand dispute resolution methods can proactively avert conflict. Nevertheless, when this is not possible, breach of contract cases often see the inside of Thai courts.
Damages
Contracts serve as a foundation for business transactions and relationships, but their violations can have serious legal ramifications. Understanding the legal framework, prevalent forms of breach and available remedies can help both businesses and individuals navigate contractual disputes without resorting to expensive and lengthy litigation.
In Thailand, a breach of contract involves one party failing to fulfil the obligations and duties stipulated in a legally binding agreement. This can occur through express repudiation or implied repudiation (Section 149, TCCC). The non-breaching party may claim damages in accordance with the law, which entails compensation for actual losses incurred, including lost profits and expenses. In cases of severe or egregious breaches, the non-breaching party may also seek stipulated or liquidated damages, a pre-determined amount established upon contract entry that serves as preset compensation for the breach.
In addition to claiming damages, the non-breaching party can file a claim for specific performance, which requires the breaching party to fulfill all or part of the contractual duties. Baker McKenzie’s Thailand lawyers can manage this process, from preparing a demand letter to appearing in court on your behalf. Dispute resolution methods such as mediation and arbitration can be useful alternatives to traditional litigation. However, these mechanisms should be utilized with caution and expert advice. In cases where they are unsuccessful, parties may proceed to litigate a contract dispute in Thai courts.
Specific Performance
In the context of business, contracts are a vital tool for delineating rights and responsibilities. But these important documents can be breached in a variety of ways, which can have serious consequences for the affected party. In order to effectively navigate contract disputes, individuals and businesses must have a solid understanding of the Thai legal framework surrounding contracts, prevalent types of breaches, and available remedies.
The Civil and Commercial Code outlines the general rules for interpreting contracts, setting forth various remedy options when a contract is breached. These include damages, which involve monetary compensation to compensate the non-breaching party for losses that resulted from the breach; specific performance, which compels the breaching party to fulfill their contractual obligations as stipulated in the contract; and rescission, which allows the non-breaching party to terminate the contract, freeing them of any duties they were under.
Unlike European law, where courts take the literal meaning of contract terms, Thai law considers good faith and commercial practice when interpreting contractual terms. As a result, the definition of what constitutes a breach is broad and can include things like failure to deliver goods or services, late delivery, defective or incomplete work, and more.
The non-breaching party may also choose to claim liquidated damages, which are pre-determined sums that are set in advance when entering into a contract. However, in order to recover these monies the non-breaching party must be able to prove that they were reasonably foreseeable at the time of the contract’s formation.
Rescission
While well-drafted contracts can help prevent contract disputes, when such disagreements arise it is important to have a clear understanding of the legal framework in Thailand that establishes contractual responsibilities and remedies. The Thai Civil and Commercial Code TCCC provides multiple avenues for legal action if parties to a contract fail to uphold their obligations, leading to a breach of contract.
A breach of contract is a common issue that can affect businesses across all industries. It is important for companies to have an experienced legal team in place that can provide counsel on the ramifications of a contract violation and what remedies are available in Thailand.
Rescission is a remedy that allows the innocent party to revert back to their position before entering into the contract. The process requires a notice of intention to rescind the contract and an opportunity for the breaching party to respond. It is also important to understand that rescission does not rescind any damages incurred.
While the rescission process is complex it can be effective for parties that have been adversely affected by a breach of contract. However, there are many factors that must be taken into account before a court will approve the rescission. For example, a court may decline to rescind a contract if it would deprive a bona fide purchaser of their interest in the property.
Injunctions
Contracts are the cornerstone of business transactions and relationships in Thailand, as they are worldwide. A breach of contract can have serious consequences and disrupt commercial operations. Understanding the legal framework, types of breaches, available remedies and resolution methods is crucial for businesses and individuals to protect their rights and interests.
The most common remedy for a breach of contract involves monetary compensation to restore the injured party to the position they would have been in had the breach not occurred. This compensation is often based on actual financial losses suffered but can also include consequential damages and stipulated or liquidated damages (pre-agreed amounts that a court sets in cases of a breach).
In the event monetary damages are insufficient to compensate an injured party, courts can apply a number of equitable remedies including specific performance, declarations and injunctions. The Thai Civil and Commercial Code outlines the legal landscape for contracts, breaches and remedies.
It is important for parties to seek legal counsel prior to commencing legal proceedings. Alternative dispute resolution methods such as negotiation and mediation offer informal means to settle a breach of contract dispute without resorting to lengthy litigation. Legal counsel can provide guidance, representation and advocacy throughout the legal process. Additionally, Thailand provides methods to seize and sell assets of debtors in order to enforce a court decision.