You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

February 21, 2014

Breach of Contract: Rescind or Perform?

Subscribe to Updates
Bangkok Post, Corporate Counsellor Column

When a contract is breached, or a party does not perform its obligations, this does not instantly affect the validity of a contract. It will continue to be valid and binding unless it is rescinded.

As a party to a contractual dispute, you have two choices: sue for performance according to the contract, or rescind the contract. In both cases, the aggrieved party possesses the right to claim damages for any loss incurred due to the other party’s breach of contract. Each option has its benefits, and deciding which one to choose will depend on whether the parties intend to continue doing business together.

In this article, we will explore the possibility of rescinding a contract without the existence of any specific contractual clause. It is possible to do so relying solely on the provisions of the Civil and Commercial Code, which sets out conditions under which a contracting party may rescind a contract.

A general right to rescind a contract arises when one party fails to perform its obligations under the contract. In the first instance, however, the party seeking to rescind must fix a reasonable period for performance and must notify the defaulting party to perform within that period. If such party still does not perform its obligations within that period, the other party may then rescind the contract.

Determining what is a reasonable period of time will require consideration of many factors, including the amount of any debt due, and the nature of any work to be performed by reference to the terms of the contract.

In cases where a party does not perform its obligation within a fixed period or at a fixed time specified in the contract, the other party may rescind the contract immediately, without notifying the defaulting party of a reasonable period for performance.

For example, let’s say a land developer is due to deliver a condominium unit in March 2014, and, as of today, the construction has not yet begun. In this case, the debtor surely cannot satisfy its obligation to deliver a unit in time, and so the sales contract can be immediately rescinded by the purchaser.

Such right to rescind immediately can be lost, however, if the party seeking to rescind has previously accepted late performance under the contract, or has behaved in a lenient manner toward the deadline to perform.

In such a case, the deadline will not be considered an essential element of the contract, and rescission cannot take place without notification of a reasonable period to perform.

There are many Supreme Court precedents in which plaintiffs have lost their advantage because they have previously accepted late payments, and therefore a time limit clause in their contract has lost its virtue and cannot be relied on in order to rescind the contract.

For people in the business world, being lenient and willing to negotiate can be a key to success, but it can also compromise the rights of the parties. Careful thought should therefore be given to any decision not to strictly enforce contractual deadlines for payment or performance.

Once a party has established the right to rescind a contract, either by notifying the defaulting party of a reasonable period to perform—which they have failed to meet—or by meeting the conditions described above, the contract may then be rescinded simply by making a declaration of intent to the other party.

Such a declaration is not required to be in any specific format and it can be made orally. But for purposes of certainty, sending a formal letter is always recommended.

When one party has exercised its right of rescission, each party is then bound to restore the other to its former condition. Interest will be added to the money to be repaid, and restitution made for services already rendered by either party by paying the appropriate value under the contract.

It is worth noting that any such amount to be paid will be separate from and in addition to the aggrieved party’s right to claim damages for losses caused by the other’s breach.

As stated above, once the party has exercised its right to rescind the contract, all the rights and obligations between the parties will end, and neither party can exercise its right to sue for compulsory performance.

Download Full Article
Related Professionals

Practices

Dispute Resolution and Litigation

Location

RELATED INSIGHTS​ 

June 29, 2026
Thailand’s cabinet has approved the draft Act on Liability for Defective Goods, commonly called Thailand’s “Lemon Law.” The Draft Act is currently pending consideration by Parliament. The draft law aims to strengthen buyers’ position in pursuing cases against sellers. While the Civil and Commercial Code offers provisions governing liability for defective goods, it is difficult in practice for buyers to successfully make a claim against sellers, particularly where defects are latent and not discoverable at the time of sale or delivery. By introducing product-specific rules and clearer remedies, the new law is intended to modernize Thailand’s consumer protection framework and align it more closely with international standards, and to help relieve the buyer’s burden of proof against the seller in product liability cases. If enacted, the draft act will take effect 180 days after publication in the Government Gazette, giving businesses a transition period to assess their compliance obligations. This article provides an overview of the key provisions of the draft act and highlights some practical considerations for businesses operating in Thailand. Scope and Key Definitions The draft act applies to sellers—defined as persons who sell goods in the ordinary course of business—and protects buyers, a term defined broadly to include not just the original purchaser but also transferees and successors in title. This expands the class of people who can bring claims. The law does not apply to used goods, live animals, or goods exempted by future ministerial regulation. It also leaves intact any separate warranties, promises, advertisements, or other guarantees a seller has given; those remain enforceable alongside the new statutory rights. General Liability for Defective Goods Sellers are liable for defects that exist at the time of delivery, regardless of whether the seller knew about them. Liability arises where a defect reduces: The benefit intended under
Read More
June 22, 2026
Arbitrator independence and impartiality form the cornerstone of a legitimate arbitral process. Under section 19 of the Thai Arbitration Act B.E. 2545 (2002), prospective arbitrators must disclose circumstances likely to give rise to justifiable doubts as to their impartiality or independence, and existing arbitrators must do so throughout proceedings. This mirrors article 12 of the UNCITRAL Model Law. Yet despite this clear mandate, practical implementation varies significantly across Thailand’s arbitration landscape. Background Thailand’s two principal arbitration institutions, the Thai Arbitration Institute (TAI) and the Thailand Arbitration Center (THAC), both maintain procedures for addressing arbitrator challenges and require compliance with the statutory disclosure obligation. Under both sets of rules, any party wishing to challenge an arbitrator must submit a challenge application within fifteen days of becoming aware of the relevant facts, and a committee is appointed to consider the matter on a case-by-case basis. The TAI additionally prescribes its Code of Ethics and Conduct for Arbitrators to further emphasize the expectation of impartiality and transparency. However, Thailand’s arbitration ecosystem extends well beyond the TAI and THAC. Several sector-specific institutions also administer arbitral proceedings, including the Thai Commercial Arbitration Office under the Board of Trade of Thailand, the Arbitration Centre of the Office of the Insurance Commission, the Arbitration Centre of the Securities and Exchange Commission, the Office for the Prevention and Resolution of Disputes regarding Intellectual Property, and the Arbitration Centre of the Thai General Insurance Association. These institutions each operate under their own procedural rules, which were developed to serve particular industries and dispute profiles. The procedural mechanisms for securing and documenting an independence declaration are not uniformly established across these forums. Consequences of Procedural Inconsistency This creates a notable gap. Not all arbitration bodies have a formalized procedure requiring written independence statements before proceedings commence. Some tribunals proceed
Read More
June 16, 2026
The president of Thailand’s Supreme Court has issued new recommendations providing courts with criminal jurisdiction with a comprehensive framework for identifying and dismissing criminal cases brought in bad faith. Published in the Government Gazette on May 29, 2026, after being signed on May 25, the Recommendations of the President of the Supreme Court Concerning Bad-Faith Litigation in Criminal Cases B.E. 2569 were issued under Section 5 of the Act on the Organization of Courts of Justice. The recommendations took effect upon publication and represent a significant step in Thailand’s efforts to curb abusive criminal litigation, including strategic lawsuits against public participation (SLAPP). Background Section 161/1 of Thailand’s Criminal Procedure Code empowers courts to dismiss criminal cases filed dishonestly or with the intent to harass or take unfair advantage of a defendant. The new recommendations provide detailed guidance that courts previously lacked on identifying and handling such prosecutions. Definition of Bad-Faith Litigation Under recommendation 1, filing a criminal case in bad faith is defined broadly to encompass three categories: Harassment-type filings involving intimidation, threats, or creating unreasonable hardship for the defendant; Coercive filings designed to pressure the defendant into acting or refraining from acting for illegitimate benefit; and False or misleading filings that deliberately assert incorrect material facts or conceal such facts. Circumstances Indicating Bad Faith Recommendation 2 sets out specific circumstances that should raise a court’s suspicion that a filing may violate section 161/1. These include: Filing in a distant court far from the defendant’s domicile without benefiting the adjudication; Retaliation against the defendant’s advocacy for human rights, environmental protection, consumer rights, labor rights, or other public interests—effectively establishing an express anti-SLAPP framework; Retaliation against whistleblowers who disclosed corruption or unlawful conduct; Retaliation against individuals responsible for investigating the plaintiff’s wrongdoing or who concluded such an investigation; Filing multiple
Read More
June 10, 2026
For multinational franchisors operating in Thailand, a key risk after franchise termination is that former outlets may continue operating in ways that could easily mislead consumers into believing they remain within the authorized network. To justify such operations, former franchisees often argue that the termination was invalid or ineffective. As a result, these cases are often treated as contractual disputes, making it difficult for franchisors to obtain injunctive relief before a final judgment confirms that the termination was lawful. Franchisors face significant commercial and reputational harm during lengthy proceedings, including consumer confusion, disruption to franchise restructuring, and damage to brand reputation and customer trust. In an encouraging development, the Thai court in a 2025 case responded to the problem of unauthorized post-termination franchise operations by granting interim relief, recognizing broader brand and consumer harm, and awarding substantial damages, highlighting a successful litigation strategy of framing the dispute not merely as a contractual termination issue but as trademark infringement causing ongoing commercial injury. The Subway Case From December 2024 to mid-2025, an unauthorized “Subway®” franchise operation in Thailand attracted substantial public and media attention. Reports and online discussions about unauthorized Subway® stores circulated widely after complaints arose about food quality and customer experience at certain outlets that were allegedly operating after their franchise rights had expired. Because these stores continued to use Subway® trademarks, trade dress, and overall commercial appearance, many consumers were unable to distinguish them from authorized operations, resulting in reputational risks and customer confusion that affected the franchisor’s brand and franchise system in Thailand. Subway treated this matter with the utmost seriousness and moved promptly to protect its brand, franchise system, and customers. It filed a civil action with the IP&IT Court seeking a permanent injunction and damages. During the proceedings, the court granted a preliminary injunction
Read More