Contract Review in Thailand

Contracts are where commercial deals become enforceable promises — but in Thailand the law, administrative gatekeepers and local practice create some risks foreign drafters often miss. A focused contract review is therefore not a language edit; it is a risk audit that must check (1) legal capacity and licenses, (2) the commercial mechanics that will actually make the project work, and (3) enforceability and remedies you can use in Thailand. Below is a practitioner’s roadmap you can use the next time you review or negotiate a Thai contract.

The legal frame you must start from

Thai contract law sits in the Civil and Commercial Code (formation, performance, remedies) and recognizes electronic contracts/signatures under the Electronic Transactions Act (ETA). Thailand also has a modern data-protection regime (the PDPA) and sectoral rules (e.g., the Foreign Business Act / BOI and Land Department requirements) that often change how a contract should be drafted or implemented. These statutes determine core questions such as whether an agreement is valid, which party must register transactions (land/leases) and whether an electronic execution is sufficient.

First things first: verify the parties and authority

Before you read any clause, confirm the counterparty is who it says it is and that the signatory can bind it. For Thai companies fetch a DBD company extract (certified e-certificate) showing current directors, registered capital and any unusual charges — these details control signatures, share structure and nominee risk. If a foreign entity is involved, check the corporate documents, board minutes authorizing the transaction and the power of attorney for the signer. If the business is regulated or may fall under the FBA/BOI rules, flag that immediately: an unpermitted activity or undocumented foreign control can render performance illegal.

The commercial mechanics you must test

  1. Scope, deliverables and acceptance. Define measurable deliverables (spec sheets, acceptance tests, milestone certificates). Vague language (“best efforts”, “as agreed”) kills enforcement in disputes.

  2. Price, currency, VAT and withholding. State the currency, invoicing rules, late-payment interest and which party bears VAT or any Thai withholding obligations. Assume VAT and withholding may apply unless the contract states otherwise and provides tax gross-up mechanics.

  3. Payment security. For high-value projects insist on an escrow, bank guarantee or on-demand performance bond — Thailand’s banks commonly issue internationally usable BGs. Spell out drawdown mechanics and the documentary trigger for a call.

  4. Change control & variations. Define formal variation procedures and price-adjustment formulas for cost inflation, FX swings or scope creep.

(These are practical checks — each element reduces future litigation risk.)

Remedies, damages and limitation clauses — how courts treat them

Thai law recognizes stipulated/contracted damages (liquidated damages or “penalty”), but courts can reduce an amount deemed unreasonable compared with the actual loss: drafting should therefore explain the measurement method and include a mutual, commercial rationale for the sum. Similarly, limitation of liability and exclusion clauses are generally enforceable but are scrutinized if they attempt to exclude liability for willful misconduct or statutory obligations. Make limitation caps realistic and tie them to the contract value or insurance limits. 

Warranties, indemnities and insurance — tighten the language

Draft warranties to be specific, time-limited and carve-out free (no “to the best of” unless you accept the risk). Indemnities should specify covered losses (including legal costs) and how claims are made and disputed. Require insurance with Thai-local insurers or international underwriters and obtain certificates early — insurers in Thailand often need local endorsements or clauses.

IP, data and confidentiality — PDPA matters

If the contract touches personal data or cross-border data flows, require a Data Processing Agreement (DPA) and PDPA compliance covenants (lawful basis, retention limits, security, breach notifications). For IP, ensure assignments or license grants are effective under Thai law, include moral-rights waivers where permissible, and specify who holds source code in escrow for software projects. 

Change of control, assignment & regulatory traps

Prohibit assignment without consent — but add a carve-out for permitted, notified transfers to group affiliates. Critically, if the company holds BOI incentives or operates in FBA-restricted sectors, change-of-control may trigger license undertakings or re-qualification requirements: model the post-transfer regulatory consequences and require seller warranties about compliance and remediation.

Force majeure, impossibility & practical exit routes

Don’t rely on a generic “force majeure” clause. List specific events, define notice and mitigation duties, allocate costs during suspension, and set a clear termination point (e.g., 90–180 days). Also consider short-term relief like price re-negotiation triggers or extension of time with liquidated-damages relief — courts expect parties to mitigate and will review proportionality.

Dispute resolution and enforcement — pick seat and mechanism carefully

Arbitration is the default for international commercial contracts (Thai courts support arbitration and Thailand is a New York Convention signatory), but remember: arbitration does not dispense with the need for urgent Thai court relief — courts will grant interim injunctions supporting arbitration awards. In many Thai deals use arbitration (SIAC/HK/ICC) with an express clause allowing Thai-court interim measures and choose a neutral seat that matches your enforcement priorities. 

Evidence & practical enforceability — prepare now, not later

Thai procedure limits broad discovery. That means preserve originals, obtain contemporaneous witness statements, and keep audit-quality bank traces. If you think you may need emergency relief (attachment, freezing order), prepare asset-trace exhibits and affidavits ready for a prompt ex-parte application.

12-point contract-review checklist (operational)

  1. Confirm identity, DBD extract and signatory authority.

  2. Check FBA/BOI/regulatory permissions for the activity. 

  3. Define scope, acceptance tests and deliverables.

  4. State currency, invoicing, VAT and withholding mechanics.

  5. Require performance security (BG/escrow).

  6. Draft liquidated damages with measurement rationale. 

  7. Limit and cap liability sensibly; exclude willful misconduct carve-outs.

  8. Tighten warranties and include survival periods.

  9. Add PDPA/DPA clauses for personal data. 

  10. Set a practical force-majeure regime and suspension/termination plan.

  11. Choose arbitration seat and include Thai-court carve-outs for interim relief. 

  12. Preserve originals, expert certificates and bank traces as an immediate step.

Final practical note

A Thai contract review should not be a last-minute pass. Build a short legal pack that contains (A) verified DBD extracts, (B) regulatory licenses or BOI certificate, (C) draft invoices and performance security forms, and (D) PDPA/DPA templates. Spend the lawyer’s time on enforceability mechanics (security, acceptance tests, evidence preservation and interim remedies) — those practical items decide whether a right on paper becomes recoverable in Thailand.


Visit our website for more information: https://www.siam-legal.com/realestate/Review-of-Contracts-in-Thailand.php

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