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An Overview of Thailand’s Civil and Commercial Code in Thailand: Structure, Application, and Impact
Law in Thailand could be regarded as a civil law system; however, it also features some common law influences, which are implemented though codification (such as contract law). This Code is not only fundamental for government officials or Thai citizens but also for foreign entrepreneurs and transnational companies in Thailand. Whether entering into real estate deals, negotiating joint ventures or establishing companies, having an in-depth knowledge of structure and provisions of the Civil and Commercial Code in Thailand is crucial for legal compliance and protection of legal interests.
The Code is expected to bring clarity and stability to foreign clients and multinational entities who enter into business transactions in Thailand. Its form (modeled on the European) provides both lawyers and business people with a clear framework-within which to work right from contract-based obligations and commercial dealings to rights exchangeable for corporate property. This paper provides a focused examination of the relevant Books of the Civil and Commercial Code in Thailand for foreign investors, and aims to be a practical handbook for the comprehension of its most important principles, as well as its practical consequences.
At Benoit & Partners, we provide legal guidance on Thailand’s Civil and Commercial Code for foreign investors and international businesses. Our team advises on contract law, commercial transactions, corporate rights, and property-related obligations under Thailand’s civil law system. We help clients understand the structure and practical application of the Code to ensure legal compliance, protect their interests, and conduct business securely in Thailand.
Table of Contents
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What is the Civil and Commercial Code in Thailand ?
The Civil and Commercial Code forms the core statute of Thailand’s private law and governs the rights and duties of private citizens and legal persons, as well as transactions between them. The Kingdom promulgated this Code at the beginning of the 20th century. It draws inspiration from European civil law, mainly the German and French legal systems. Lawmakers conceived the Code as an effort to harmonize civil and commercial laws, and they sought to instill consistency, certainty, and predictability in contractual and property relations within the Kingdom.
The Code is divided into six books: general legal principles, obligations, contracts, property, family matters, and inheritance. Books I through IV are of particular concern to foreign investors and those who do business with Moldovan citizens, as they govern the legal aspects of business transactions, company formation, contractual relationships, and property rights.
What is the structure of the Civil and Commercial Code in Thailand?
- Book I – General Principles :
First, Book I sets out the fundamental legal principles that govern persons, legal capacity, domicile, and prescription periods. It establishes the basic legal status of natural and juristic persons, defines the capacity to enter into legal acts, and sets general time limits for bringing claims.
- Book II – Obligations :
Second, Book II covers the law of obligations, which includes both contract law and tort law. It explains how parties form, perform, and discharge contracts, and it defines the rights and liabilities that arise when a party breaches a contract.
- Book III – Specific Contracts :
Third, Book III addresses various specific types of contracts, including sale, lease, loan, insurance, and agency. It defines the rights and obligations of the parties and explains the legal effects of each type of contract.
- Book IV – Property :
Next, Book IV addresses the different modes of acquiring property, possession, and lesser real rights such as usufruct, servitude, and mortgage. It also regulates the transfer of property and the registration of rights with the Land Department.
Last, Books V and VI concern family and inheritance matters and are less relevant for most foreign investors.
What are the key contract rules under the Civil and Commercial Code in Thailand?
- Formation of Contracts
Under Articles 151 to 168, a valid contract must include an offer, acceptance, mutual consent, a lawful objective, and parties with legal capacity. The absence of any of these elements can lead to nullity or voidability.
- Void and Voidable Contracts
Contracts contrary to public order or good morals are null and void under Article150. The contracts that have been obtained by fraud or duress are voidable. Contracts which are wanting in that which is essential are void from the beginning.
- Standard and Consumer Contracts
While Thai law permits oral contracts, parties should use written contracts. Consumer protection legislation may regulate standard-form contracts. Courts may declare unfair terms null.
How does Thai law regulate obligations and liabilities?
- Tort Liability – Article 420
Anyone who unlawfully and wilfully or negligently causes damage to another person is liable to provide compensation. This rule applies to both damage to property and personal injury.
- Performance and Remedies
Legal remedies for breach of obligation include specific performance, damages, and termination. Set-off, novation, and subrogation are also recognized mechanisms.
- Prescription Periods
Contractual claims usually prescribe in ten years. Tort claims must be filed within one year from the date when the claimant becomes aware of the damage and the liable party.
What are the key commercial contracts under the Civil and Commercial Code in Thailand?
Book III of the Civil and Commercial Code in Thailand governs specific contracts and sets out the legal framework applicable to each type of agreement. The provisions detail the essential components of contracts, define the obligations of the parties, establish default mechanisms, and provide remedies in cases of breach. Contracts of sale, lease, loan, and agency rank among the most common forms of contracts used in business.
Contract of Sale
The sale contract, governed by Articles 453 to 498, represents the most common commercial agreement. It establishes the mutual responsibilities of the buyer and the seller. Seller must deliver the object of the sale free from any charge or encumbrance, unless the parties stipulate otherwise. The buyer must pay the agreed price and take delivery of the goods. As a general rule, the Code provides that title passes at the time of sale unless the parties agree differently, and the law subjects the transfer of title to legal control. The Code also regulates implied warranties, particularly merchantability and freedom from defects, and it provides remedies for breach, such as rescission or deduction of damages from the purchase price. In international transactions, parties often supplement Thai law with INCOTERMS or arbitration clauses.
Lease Contracts
Lease agreements are governed by Articles 537 to 571. The lessor must deliver the property in good condition and allow the lessee to enjoy its use.
The lessee must treat the property with due care and pay the rent. When the parties agree on a lease of immovable property for a period exceeding three years, they must register it with the Land Department for it to take effect against third parties. In commercial leases, particularly between a local and a foreign entity, the parties often include provisions on renewal, maintenance responsibilities, early termination, and dispute resolution. Foreigners frequently use a leasehold structure to gain access to land or buildings that the Land Code otherwise prohibits them from acquiring.
Loan Agreements
Articles 653 to 659 govern loans of money and goods. A borrower must repay a loan of money with or without interest, depending on the terms of the agreement. The Civil and Commercial Code sets the maximum interest rate at 15% per annum, unless a specific law provides a lower rate. If the borrower defaults on repayment, the lender may enforce the judgment through the courts and recover principal, fees, and interest. Loan agreements include covenants that provide guarantees or security, such as pledges or mortgages. Tax law applies to loan agreements, and the parties must draft them in a manner that complies with civil and fiscal obligations.
Agency and Mandate Contracts
Agency arrangements allow an individual, the agent, to act on behalf of another individual, the principal. Articles 797 to 809 define the agent’s authority, actions, and liability. Agent owes duties of care and loyalty and must account for all acts undertaken for the principal. The principal bears responsibility for acts that the agent commits within the scope of the authority. The parties may terminate an agency by mutual agreement, revocation, or withdrawal of the mandate. In commercial practice, these agreements play a vital role in selling, negotiating, and performing services. The parties should draft the scope of authority carefully to avoid creating unintended obligations.
Additional Contract Types
The Civil and Commercial Code also regulates other specific contract forms that may be relevant for investors and commercial actors, such as:
- Hire of Work (Articles 587–607), applicable to construction or service provision agreements.
- Partnership Agreements, which are foundational for business collaboration.
- Suretyship (Articles 680–709), where a third party guarantees the debtor’s obligations.
- Pledge and Mortgage (Articles 747–805), which offer security for contractual performance.
Each contract has its own terms and provisions which can be legally enforced in a court of law that vary depending on the business relationship. Parties need to be well-acquainted with the contractual structure to make the contract enforceable and to mitigate risks.
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How is property ownership defined and protected?
- Classification of Property
The Code classifies property as movable and immovable and treats ownership and possession as separate concepts.
- Usufruct and Other Real Rights
Foreigners often rely on usufruct rights, which allow them to use and enjoy land without transferring ownership.
- Registration and Foreign Ownership
Parties must register property rights with the Land Department. Thai law does not allow foreigners to own land, but foreigners may lease land or own condominiums under certain conditions.
What legal remedies are available under Thai law?
- Specific Performance and Damages
Non-performing parties must perform their obligations or compensate the injured party. Damages cover actual loss, and courts rarely award punitive damages.
- Wrongful Termination – Article 521
If a party terminates a fixed-term contract early without cause, the law holds that party liable for the resulting damages.
- Enforcement and Dispute Resolution
Parties bring actions seeking enforcement before the courts. While a separate statute regulates arbitration, businesses commonly use it in commercial matters.
What are the different types of companies under the Civil and Commercial Code in Thailand?
The Civil and Commercial Code in Thailand outlines five types of business organizations that operate under Thai law. Each form has distinct features, legal implications, and a specific set of rules that investors must carefully analyze.
Sole Proprietorship
A sole proprietorship represents the least complicated type of business organization, as one person owns and operates the business and assumes personal responsibility for all liabilities and obligations. The owner exercises full control but also bears full personal risk. This structure offers no liability protection and foreign investors rarely use it because of its legal exposure and restrictions on foreign ownership.
Ordinary Partnership
A partnership at will arises when two or more persons decide to carry on business together and agree to share the profits. Articles 1012 to 1048 provide that all partners in an ordinary partnership bear joint and several liability for the obligations of the business. When the partnership does not register, the law does not treat it as a juristic person. When the partners register an ordinary partnership, the law treats it as a legal agent for its members, and the partnership must register with the Department of Business Development (DBD). This structure remains inherently risky because the partners assume unlimited liability.
Limited Partnership
The limited partnership, governed by Articles 1064 to 1087, distinguishes between general partners, who bear unlimited liability, and limited partners, whose liability is limited to their contribution. The partnership must register to obtain legal recognition. This form offers some protection to foreign investors, but it remains relatively inflexible and appears less frequently than the private limited company in foreign ownership structures.
Private Limited Company (Co., Ltd.)
This is the most common structure for businesses in Thailand, particularly for foreign investors. Regulated by Articles 1096 o 1273 of the civil and commercial code a ltd is a legal entity with capital stock divided into shares of equal value. Private company liability of members is restricted to the unpaid portion of the shares in that company.
Three or more promoters must act as the first shareholders. The company must maintain a minimum of three shareholders at all times. After the promoters register the Memorandum of Association and hold the statutory meeting, the company may register with the Department of Business Development (DBD). The company’s by-laws regulate its internal management.
The company must have at least one director and must hold an annual general meeting of shareholders. Directors owe fiduciary and statutory duties under Articles 1144 to 1176. These duties include acting in good faith, avoiding conflicts of interest, and ensuring compliance with statutory reporting and accounting obligations.
The transfer of shares is generally unrestricted unless the Articles provide otherwise. However, when foreign ownership exceeds 49%, the Foreign Business Act may impose restrictions, and the company must obtain a Foreign Business License unless an exemption applies.
Conclusion
Finally, the Civil and Commercial Code in Thailand stands as the cornerstone of Thailand’s private legal regime. It offers a unified written body of law governing personal and business relations, including contracts, obligations, and property rights. Foreign investors, industries, companies, and legal practitioners must understand the various provisions of the Code. The law also contains specific regulations for certain matters and situations, but the Civil and Commercial Code in Thailand provides a predictable legal environment that allows parties to claim rights, enforce transactions, and protect investments. Legal guidance based on the principles of the Code therefore remains absolutely essential for any significant commercial venture in the Kingdom.
The Civil and Commercial Code forms the backbone of Thailand’s private law, regulating contracts, property, company formation, and obligations. For foreign investors, it provides legal predictability and a structured framework to conduct business, protect investments, and resolve disputes in compliance with Thai law.
The Code governs a wide range of private and commercial relationships, including contracts of sale, lease, loan, agency, property rights, and corporate structures such as partnerships and limited companies. It defines the rights and obligations of all parties involved in commercial transactions.
The Code sets out the legal framework for establishing and managing business entities, including sole proprietorships, partnerships, and private limited companies. It specifies requirements for registration, shareholder rights, director duties, and compliance obligations under Thai law.
The Civil and Commercial Code offers protection against breach of contract, wrongful acts (torts), and property violations. The law provides remedies such as damages, specific performance, and termination of contracts. Courts and arbitration mechanisms allow parties to enforce rights and resolve commercial disputes.