Breach of Contract in Thailand. Breach of contract under Thai law is any failure to perform, late performance, or defective performance of a contractual obligation. Thailand is a civil-law jurisdiction, so the starting point is the Civil and Commercial Code (CCC), which lays out when a party is “in default,” the spectrum of remedies (from compelling performance to damages), and how courts calculate compensation. In practice, judges take a pragmatic approach: they look first to the contract wording, then apply CCC principles on causation, foreseeability of loss, and fairness.
1) When is a party “in breach”?
Thai law distinguishes between simple delay and non-performance. If the contract sets a calendar date, a debtor is automatically in default when that date passes without performance; if no date is set, the creditor usually must give a warning notice before default attaches. These rules matter because default triggers liability for damages and (for money debts) default interest.
Two common breach patterns appear in Thai cases:
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Defective performance (goods/services don’t meet the contract’s “true intent and purpose”). The creditor may seek compensation for the shortfall.
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Delay that defeats the bargain (time truly “of the essence”). The creditor can refuse late performance and claim damages for non-performance.
2) Your toolbox of remedies
A. Compelling performance (specific performance)
Unlike many common-law systems, Thai courts are comfortable ordering specific performance when the obligation’s nature allows it—for example, to deliver identified goods or execute a deed. If performance can’t sensibly be compelled, the court may allow it to be done by a third person at the debtor’s expense, or substitute a judgment for a required declaration of intent. You can still claim damages on top if loss was caused.
B. Damages (how far do they go?)
The general measure is compensation for losses that naturally arise from the breach. You can also recover losses from special circumstances if the breaching party foresaw or ought to have foreseen them (a foreseeability test similar to Hadley v Baxendale). Thai practitioners routinely cite these CCC principles when enforcing indemnities and assessing consequential losses. Proof matters: speculative or punitive damages are not available.
C. Agreed sums: “penalty” / liquidated damages
Thai contracts often use penalty (liquidated damages) clauses. They are enforceable, but Thai courts can reduce an agreed penalty if it’s excessive in relation to the creditor’s legitimate interest. Clauses can either replace performance (for total failure) or sit in addition to performance (for late or improper performance). If you elect to claim a “penalty in lieu of performance,” you generally waive the right to compel performance—but you can still prove further damage beyond the minimum. Drafting which penalty applies (and when) is critical.
D. Rescission and restitution
For serious breaches in reciprocal contracts, Thai law lets the innocent party rescind—unwind the deal—then seek restitution to restore the pre-contract position together with damages if appropriate. The CCC provisions on rescission set out when and how to terminate and what must be returned.
3) Money debts: interest after breach
Statutory interest rules changed in 2021. If a contract is silent, the base statutory interest is 3% per year (reviewed every three years by the Ministry of Finance). Default interest on overdue monetary obligations is the base rate plus 2% (so typically 5%), and for instalments, default interest is calculated only on the overdue principal of the defaulted instalment—not on amounts not yet due. Parties can still agree different rates within legal limits.
4) Force majeure, impossibility, and risk allocation
Thai law recognizes force majeure broadly as an event whose occurrence or harmful result could not be prevented even with appropriate care (CCC Section 8). If performance becomes impossible without fault after the contract is formed, the debtor is released from the duty to perform; if impossibility stems from the debtor’s fault, damages apply. In practice, courts look first to any force-majeure clause: notice requirements, what events are covered, and whether the clause suspends, extends, or excuses performance.
Illustration: A factory shutdown due to a government order may excuse timely delivery if your clause covers governmental acts and you promptly notified the buyer; merely higher costs or inconvenience typically won’t.
5) Limitation (prescription) periods
Most contract claims are subject to the general 10-year prescription if no specific period applies. Claims for periodic payments (e.g., rent, interest, dividends) typically carry a 5-year limit. Always check the specific contract type—some special statutes set shorter periods.
6) How judges apply these rules (field examples)
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Late delivery + agreed delay penalty
A Thai distributor contract fixes delivery dates and a THB-per-day penalty “in addition to performance.” The supplier delivers 40 days late. The buyer can accept the goods and claim the penalty for delay; the court may reduce it if the rate is disproportionate to the buyer’s loss (e.g., the buyer still sold on time). If the clause instead stated “penalty in lieu of performance,” electing the penalty would typically bar a demand for delivery. -
Defective works + right to cure
A contractor hands over an M&E system with performance shortfalls. The employer can seek specific performance (rectification) and damages for proved losses (e.g., temporary cooling rentals). If rectification is impracticable, the court can order the work done by a third party at the contractor’s expense. -
Changed circumstances claim (force majeure rejected)
A supplier invokes “force majeure” because import prices spiked. Without a clause covering market price fluctuations and with no true impossibility, Thai courts are unlikely to excuse performance; the supplier remains liable for non-performance or delay subject to foreseeability and proof of loss.
7) Evidence wins cases
Across industries, three items consistently move the needle:
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Clear milestones and acceptance criteria (to show what “performance” actually means).
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Contemporaneous notices (to put the other side in default or preserve a force-majeure defense).
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Damage proofs that track foreseeability—e.g., purchase orders you lost, mitigation costs, replacement contracts—so the court can comfortably award actual loss and, where appropriate, foreseeable consequential loss.
8) Litigation, arbitration, and interim protection
Commercial contracts with foreign parties often choose arbitration in Bangkok or abroad. Thailand’s Arbitration Act (2002, amended 2019) supports both domestic and international arbitration and Thai courts will recognize and enforce foreign awards under the New York Convention—subject to limited public-policy defenses. Thai courts can also assist with interim measures (e.g., asset freezes) in support of arbitration under the Act and court practice.
9) Practical playbook for businesses
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Draft with the end in mind: pair your specific performance rights with precise deliverables; if using liquidated damages, define whether they are in addition to or in lieu of performance, and include a rationale to protect against judicial reduction.
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Police your deadlines: if no fixed date, send a formal warning before escalating—this both triggers default and strengthens your damages case.
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Money claims: where the contract is silent, calculate interest using the updated statutory regime (base 3% + 2% for default; instalment rule).
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When the unexpected hits: check your force-majeure definition and give timely notice; don’t assume hardship equals impossibility under Thai law.
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Watch the clock: diary the 10-year general limit and 5-year periodic-payment claims; some sectors have shorter periods.
Bottom line
Thai courts enforce contracts as written but overlay them with CCC rules that reward clarity, timely notices, and credible proof of loss. If you structure your deals and your dispute record around specific performance where it matters, foreseeable and provable damages, and well-crafted penalty and force-majeure clauses, you’ll both lower breach risk and maximize recovery if a dispute becomes unavoidable.