Thailand Contract Clauses: Essential Terms Every Foreign SME Should Include

Thailand Contract Clauses: Essential Terms Every Foreign SME Should Include

Thailand Contract Clauses: Essential Terms Every Foreign SME Should Include

Well drafted agreements are a risk-control tool. For foreign-owned SMEs operating in Thailand, clear Thailand contract clauses help prevent disputes, ensure enforceability under Thai law, and protect commercial value. This guide from GENTLE LAW IBL outlines the must-have terms, why they matter, and how Thai statutes affect your drafting.

Snapshot: the legal backbone

• The Civil and Commercial Code of Thailand governs contract formation, validity, and remedies. Some transactions require written form and registration to be enforceable, for example the sale of immovable property and a lease of immovable property for three years or more.

• Thai courts respect arbitration agreements that meet the Arbitration Act B.E. 2545 requirements, including the agreement being in writing and signed. Foreign awards can be enforced in Thailand if statutory conditions are met.

• Unfair terms in standard form contracts can be void or adjusted by Thai courts under the Unfair Contract Terms Act and the Contract Committee’s regime for certain controlled contracts.

1) Parties, capacity, and definitions

Identify full legal names, registration numbers, and addresses. Add defined terms for products, milestones, and acceptance tests. Accurate party information prevents enforcement issues and helps with service of process.

2) Scope of work or services

Use measurable deliverables, technical specifications, service levels, and acceptance procedures. For projects with multiple phases, attach a Statement of Work with timelines and change control.

3) Price, payment, and taxes

Set currency, due dates, invoicing mechanics, late-payment interest, and retention if relevant. Clarify tax treatment and who bears withholding or VAT consequences arising from the transaction.

4) Term and termination

State start date and end date, renewal logic, and grounds for termination for convenience and for cause. Include cure periods and detailed post-termination obligations such as handover of materials and final payments.

5) Confidentiality and data protection

Protect trade secrets, source code, client data, and pricing. Add data handling and minimum security controls. If personal data is processed, align your clause set with Thailand’s data protection framework and add a separate data processing addendum when needed.

6) Intellectual property

Allocate ownership of pre-existing IP and project deliverables. Grant licences that fit your business model. Add moral rights waivers where lawful and include escrow or step-in only if proportionate.

7) Performance standards, warranties, and remedies

Describe uptime targets, defect classes, and fix times. Use specific remedies such as re-performance, repair, or replacement before monetary remedies. Tie service credits to measurable service levels.

8) Liability allocation

Use proportionate caps linked to contract value. Exclude indirect damages where commercially agreed, while preserving liability that cannot legally be excluded under Thai law in standard form consumer contracts.

9) Force majeure

List events beyond reasonable control, the notice procedure, mitigation steps, and suspension period. Provide a termination right if the event persists beyond an agreed long-stop.

10) Compliance with laws

Confirm both parties will comply with applicable Thai statutes and sector rules. If your product touches a regulated area, cross reference the licence or permit.

11) Governing law, jurisdiction, and dispute resolution

Choose Thai law when performance is in Thailand or assets are here. If arbitration is desirable, ensure the arbitration agreement is in writing, signed, and clearly states the intent to arbitrate defined disputes. Select seat, rules, language, and number of arbitrators. Thailand recognises such agreements and allows enforcement of awards that meet statutory conditions.

12) Language and counterparts

Where bilingual contracts are used, specify the prevailing language for interpretation. Provide for execution in counterparts and electronic signatures if operationally required.

Checklist of Thailand contract clauses (focus keyword included)

Use this checklist to verify that your Thailand contract clauses address Thai enforceability:

1. Written form and registration when required by law

2. Sale of immovable property must be in writing and registered to be enforceable.

3. Lease of immovable property for three years or more must be in writing and registered.

4. Arbitration box-tickers

5. Arbitration agreement in writing, signed, and expressly stating intent to arbitrate defined disputes.

6. Fairness controls for standard terms

7. Avoid clauses that are unfair in standard form contracts. The Contract Committee issues rules for certain controlled contracts and Thai courts may strike or adjust unfair terms under the Unfair Contract Terms Act.

8. Operational clarity

9. Detailed scope, acceptance, timelines, payment mechanics, IP allocation, confidentiality, data handling, liability caps, force majeure, and termination roadmap.

Frequent drafting pitfalls for foreign SMEs

• Relying on overseas templates that miss Thai formality rules on registration for real estate transactions.

• Arbitration clauses that do not meet the written and signature requirements under Thai law.

• Using aggressive limitation clauses in standard form consumer contracts that may be void or adjusted under Thai unfair terms controls.

Practical negotiating tips

• Align caps, exclusions, and remedies with the risk profile.

• Keep acceptance criteria objective and linked to test results.

• Use bilingual versions for cross-border teams, but nominate a prevailing language for interpretation.

• Maintain a clear variation mechanism for scope and price changes.

How GENTLE LAW IBL can help

• Contract design and review tailored to Thai enforceability rules.

• Bilingual templates with arbitration ready wording and Thailand contract clauses tuned to your industry.

• Training for sales, procurement, and project teams on contract risk.

• Dispute strategy and settlement support.

Ready for a contract health check that fits Thai law and your commercial goals Contact GENTLE LAW IBL: gentlelawibl.com