A breach of contract occurs when one party fails to follow the terms of a written or oral agreement. This can cause serious problems for all parties involved, especially in a business setting.
An NDA, or Non-Disclosure Agreement, is an important contract to protect sensitive information such as customer lists or intellectual property from being shared without consent. While Thai law doesn’t have explicit legislation regarding NDAs, courts will generally respect and enforce their terms.
Remedy
When contracts are breached it can have serious consequences for your business. Although most attorneys will try to settle contract disputes through informal methods such as demand letters and arbitration, it is sometimes necessary to take legal action involving Thailand courts.
The most common remedy for contract breach is damages. Damages are monetary awards that are designed to compensate the victim for any losses caused by the breach.
In addition to damages, a party may seek specific performance. This remedy involves a court order requiring the breaching party to complete their contractual obligations.
In general, Thai courts interpret contract terms using both the intention and expression theories of interpreting contracts. In addition, the courts use principles of good faith and commercial practice when interpreting contracts. This helps them to identify the common intention of the parties and ascertain whether a term in a contract was implied or expressed. Consequently, the court may void a contract on the grounds of fraud.
Damages
When a contract dispute is brought to Thai court it is common that the parties will seek damages. This could include a penalty for the breaching party, the cost of performing the contract, lost profits or other loss or injury caused by the contract violation.
It may be possible to recover the amount ruled in court by seizing assets of the guilty party or liquidating them. In addition, the legal system in Thailand allows for methods to retrieve the cost of legal fees and losses from the non-breaching party.
Whether or not a claim for damages is successful depends on the nature of the breach. For example, if a breach is based on fraud or misrepresentation it would be more difficult to establish than a claim based on a material breach of the contract.
Rescission
In Thailand there are situations when a contract can be rescinded without the existence of a specific contractual clause. Such a situation arises when one of the parties fails to fulfil an obligation as required under the contract or law. In such a case the other party may rescind the contract in accordance with Section 387 of the Civil and Commercial Code.
The other party must first fix a reasonable period of time for performance and notify the defaulting party to perform within that period. If the party does not perform within that period, he or she has no right to rescind the contract.
In such a case, the other party must pay damages for any losses or damage caused by the breach of contract. Alternatively, the court may order the party to rescind the contract. This is usually accompanied by a requirement that the other party reimburse any expenses incurred. In addition, the court may also impose an injunction to prevent the disclosure of confidential information.
Arbitration
The right to arbitrate a contract is generally recognized by Thai law, so long as the terms of the arbitration agreement are not contrary to mandatory laws or public order or public morals, which would render them void. The only exception is when the terms of the arbitration agreement conflict with a public policy.
The ICC (“International Chamber of Commerce”) Arbitration Rules have recently been published in the Thai language and offer emergency arbitrator provisions for parties to seek urgent temporary relief, prior to the formation of an arbitral tribunal. This is a welcome progression of the recent amendments to the Arbitration Act which have made Thailand more foreign arbitrator friendly, removing the need for complex work permits for foreign arbitrators.
Baker McKenzie has a team of experienced Thailand lawyers who can manage the entire process of arbitration, including initiating the proceedings, appearing as counsel in local courts and enforcing or challenging an award. Wynn Pakdeejit leads the practice, assisted by Pisut Rakwong and Suksawat Watewai.
