A breach of contract can have serious consequences for individuals and businesses. Having an understanding of the legal framework and available remedies is essential.
Detailed documentation and clear communication reduce the likelihood of misunderstandings that can lead to contract breaches. Taking proactive steps and exploring alternative dispute resolution methods can also speed up and lower the costs of resolving a breach.
As the cornerstone of commercial transactions, contracts are a vital part of the business world. When a party fails to fulfil its obligations, it can be held liable for breach of contract under Thai law. This can occur in a variety of agreements including service and labour contracts, sale and purchase contracts, loan and lease contracts, real estate contracts, and more.
The remedy for a breach of contract is typically compensatory damages. These monetary awards are intended to restore the non-breaching party to the position they would have been in had the contract not been breached. They are often aligned with what the courts refer to as stipulated damages established during contractual negotiations, and may also be adjusted by the court should they be deemed unreasonable.
The legal framework for a breach of contract in Thailand is laid out in the Thai Civil and Commercial Code (TCCC). There are a number of methods for resolution, ranging from negotiation and mediation to arbitration and litigation. It is critical that businesses understand the legal landscape and available recourses in order to proactively avert contractual disputes. In the event of a dispute, having an experienced lawyer can be critical to understanding rights and obligations, navigating the legal process, and achieving a favourable outcome.
In Thailand, contracts establish a fundamental structure for parties to delineate their rights and responsibilities. Contracts typically take the form of written documents, although oral and implied contracts are also legally enforceable. A breach of contract is a failure to fulfill contractual responsibilities, and it can have significant legal consequences. The most common forms of breach of contract include actual and anticipatory breaches.
An actual breach occurs when one party fails to meet their contractual obligations within a reasonable time frame, leading to the immediate consequences outlined in the contract or under Thai law. An anticipatory breach is a statement or action that implies a party’s inability to fulfil their responsibilities, even though it is not yet an actual breach.
If a party can demonstrate that there has been a breach of contract and that they have suffered loss as a result, they may be entitled to a remedy. Several remedies are available, including damages, specific performance, and rescission.
Damages are the most common remedy and aim to compensate the non-breaching party for monetary losses resulting from the breach. In situations where monetary compensation is not adequate, the non-breaching party may seek specific performance, which compels the breaching party to fulfil their contractual obligations. In extreme cases, the non-breaching party can choose to terminate the contract. Termination releases both parties from future obligations under the contract.
Contracts serve as the cornerstone of many business transactions and legal relationships in Thailand. It is therefore important for businesses and individuals to have a thorough understanding of the legal framework, types of breaches, available remedies, and resolution methods. This knowledge will help to avoid costly disputes and ensure that contracts are properly drafted, effective, and aligned with Thai contractual legislation.
In a case of breach of contract, the parties have the option to seek rescission. This involves nullifying the contract and restoring the rights of the innocent party as if the contract had never existed. Court orders for rescission typically include damages, specific performance, and orders to revert ownership of property acquired by the innocent party under the contract. The innocent party also has the right to pursue an award of a sum representing their lost profits and expenses caused by the breach.
It is important to note that the right to rescission does not allow the party in breach to escape liability for other breaches of the law, such as torts or criminal offences. A claim for rescission may only be brought in the event that there is no other legal remedy for the breach, such as a claim for damages or specific performance. As a result, it is imperative that the terms of any agreements involving confidential information clearly define what constitutes confidential information and set out the obligations for each party, including that the information must not be disclosed or used for any other purpose than the agreed one.
Contracts form the cornerstone of many business transactions and legal relationships, but when a party fails to fulfill their contractual obligations a breach of contract can occur. Breach of contract can lead to a variety of consequences including damages, specific performance and rescission.
In general, the remedy of damages involves monetary compensation that is designed to put the injured party in the same position they would have been had the breach not occurred. These damages may include direct and indirect losses, such as lost profits or expenses incurred in the context of a contract. Consequential damages often align with what the law calls stipulated or liquidated damages, which are an amount established upon entering into a contract.
Specific performance involves a court order requiring the breaching party to fulfil their obligations under the contract. This is a remedy that can be used in cases where monetary compensation is not sufficient to compensate the non-breaching party, or when rescinding the contract would not be practical.
A breach of contract can be resolved through a variety of methods, and depending on the situation it may be appropriate to resort to the Thai courts. Baker McKenzie’s Thailand team can manage the process, including preparing a claim and appearing as counsel in local courts. We can also ensure that your contracts are well drafted to avoid any potential issues and that any Thailand dispute resolution procedures are in line with the Thai legal framework.