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

June 27, 2014

Dilemma: File a Claim or Nix the Contract?

Subscribe to Updates
Bangkok Post, Corporate Counsellor Column

Having multiple legal options is generally viewed as positive in a business context. It may, however, also imply the need to make a difficult decision—one with significant practical and legal consequences. This is particularly so where the transaction is unique, has significant monetary value, or has the potential to affect existing third-party contracts. Real estate transactions fall firmly into this category.

Take a situation in which parties enter into a sale and purchase agreement for real estate. If the seller fails to perform its obligations under the contract, the buyer who is not in breach must decide how best to proceed with the exercise of its legal rights.

These options are provided in Thailand’s Civil and Commercial Code (CCC) and have been further clarified by the Supreme Court.

Together, they establish two specific remedies for the buyer: (i) the right to claim specific performance under the contract, e.g., force transfer of ownership as contemplated by the contract; or (ii) the right to terminate the contract and restore the non-breaching party to its pre-contract condition.

The Supreme Court has made clear that these options are mutually exclusive, so a non-breaching party must clearly adopt one or the other. This is because one option legally terminates the contract, while the other maintains the breaching party’s obligation to perform under the contract—positions that are in legal contradiction.

Deciding on a specific remedy to address the seller’s breach thus requires careful consideration of the benefits and potential disadvantages of each option. In this article, we elaborate on issues the buyer should consider before exercising the right to claim specific performance or terminate the contract entirely.

Claim for Specific Performance

According to Section 213 of the CCC, when one party fails to perform its obligations under a contract, the other is entitled to enforce the contract by filing a civil claim against the defaulting party asking the court for compulsory performance.

Under Section 213, if the obligation is to carry out a juristic act such as transferring ownership of property, the court is empowered to order specific performance on the basis that such performance is consistent with the seller’s declaration of intent at the time of contracting.

In addition to obtaining specific performance, a non-breaching buyer has the right to claim compensation for any damages incurred from the seller’s failure to perform the contractual obligation. This may include contractually stipulated penalties for non-performance.

Terminate the Contract

According to Section 391 of the CCC, when a seller does not fulfill its contractual obligations, the buyer has the right to rescind the contract entirely, and each party is thereafter bound to restore the other to its pre-contract condition.

To terminate the contract, the buyer must express its intent to terminate, typically by sending a termination notice to the seller. Such expression of intent cannot be withdrawn.

The buyer also has the right to claim compensation for damages incurred from the seller’s failure to perform its obligation.

For example, if the seller fails to transfer land ownership and the buyer chooses to terminate the contract, the buyer can claim for both the price paid and for damages. After the contract is terminated, the buyer cannot claim for specific performance.

After the contract is terminated, parties then have the obligation to restore each other to their pre-contract condition. A non-defaulting party may refuse to restore the defaulting party to its pre-contract condition, however, if the latter fails to restore the former to its pre-contract condition.

Consider the case of a buyer who has placed an initial deposit for land and is permitted by the seller to possess the land before transfer of ownership.

If the seller fails to transfer ownership within the prescribed period and the buyer terminates the contract due to such breach, then the seller is required to return the deposit. If the seller refuses, however, the buyer can possess the land until the deposit is returned.

Conclusion

Prior to deciding how to proceed with a claim for specific performance or contract termination, a buyer should carefully assess its objectives in entering the contract and the seller’s ability to perform if at all possible including conducting financial due diligence. The conduct of adequate due diligence can significantly reduce the risk of breach and can avoid the cost and time required to litigate a dispute.

If avoiding a dispute is unavoidable, however, negotiation and settlement efforts should be seriously considered, as they may lead to a solution that is preferable to protracted litigation. In some cases where litigation is an unavoidable last resort, understanding the best option available to a non-breaching party can help to maximize the benefits from the dispute resolution process.

Download Full Article
Related Professionals

Practices

Dispute Resolution and Litigation

Real Estate

Location

RELATED INSIGHTS​ 

February 25, 2026
In December 2025, the National Assembly of Vietnam enacted a new Law on Construction, replacing the 2014 Law on Construction as amended in 2020. The 2025 Law on Construction will, in principle, take effect on July 1, 2026, subject to certain exceptions. Among its notable reforms, one development has attracted particular attention from both legal practitioners and market participants: the introduction of a statutory framework governing predetermined damages, commonly referred to as “liquidated damages.” This marks the first time liquidated damages have been expressly recognized at the level of primary legislation in Vietnam. While liquidated damages clauses have long been a common feature of construction contracts in practice, their legal enforceability has historically been subject to uncertainty. Although the new provision appears to represent a positive step toward greater legal clarity, it remains an open question whether it is sufficient, on its own, to provide a solid legal basis for the enforceability of liquidated damages clauses in construction disputes in Vietnam. What’s New? Article 86.2 of the 2025 Law on Construction provides (emphasis added): “Compensation for damages shall be determined on the basis of actual damages [or] predetermined damages corresponding to obligations under the construction contracts that are breached [and] the extent of such breaches.” This provision is significant in that it expressly recognizes predetermined damages, or liquidated damages, as a lawful basis for determining compensation for damage. However, the new law does not define “predetermined damages.” The absence of a statutory definition creates potential ambiguity as to the scope and nature of this concept and may give rise to disputes over how—and whether—a particular contractual clause qualifies as predetermined damages for the purposes of Article 86.2. Further, Article 86.2 qualifies the application of predetermined damages by requiring that such damages correspond to the obligations not fulfilled and the
Read More
February 20, 2026
Thailand’s Supreme Administrative Court has issued a decisive ruling annulling the Ministry of Labor’s notification that had granted an exemption for foreign pilots to fly domestic routes under wet‑lease arrangements. A wet lease is a leasing arrangement in which the aircraft is provided together with its foreign flight crew, including pilots, and related operational support, rather than the airline supplying its own pilots. The judgment, delivered on November 17, 2025, and published in the Government Gazette on January 30, 2026, follows a legal challenge brought by the Thai Pilots Association, which argued that the exemption unlawfully enabled foreign workers to assume a role traditionally reserved for Thai nationals. The notification in question, dated December 13, 2024, authorized foreign pilots who came as part of wet‑leased aircraft to fly domestic routes. The Thai Pilots Association disputed the legality of this rationale, asserting that the exemption was triggered by a private airline’s request rather than by any statutory necessity. The Ministry of Labor justified this measure by relying on aircraft‑specific approvals issued by the Ministry of Transport and by enabling the Department of Employment to issue corresponding work permits. Arguments Presented in the Case The Thai Pilots Association argued that the exemption undermined the interests of domestic pilots and conflicted with the policy intent of Thailand’s foreign‑worker regulatory framework. The lawsuit emphasized that the notification arose directly from a private airline company’s request to operate two A320 aircraft under a wet lease and that the measure had the practical effect of displacing Thai pilots who remained unemployed. Meanwhile, the Ministry of Labor defended the exemption as a temporary and necessary response to industry shortages and part of national efforts to support tourism and restore aviation capacity. Legal Framework Thai law establishes a general prohibition against foreign nationals piloting domestic aircraft. Section
Read More
February 9, 2026
When unauthorized credit card transactions occur, who bears responsibility—the cardholder or the issuing bank? In Thailand, a landmark 2025 ruling by the country’s Supreme Court has clarified this question, establishing a stricter standard for banks in fraud disputes and significantly strengthening consumer protections. The case centered on disputed charges where a customer claimed their credit card had been used without authorization. The bank sued to recover the amount, and both the court of first instance and the Court of Appeal ruled in favor of the bank. However, the Supreme Court overruled their judgments and decided that the customer did not need to pay for the unauthorized transactions, placing liability squarely on the bank. This ruling was based on three key findings, which are outlined below. Finding 1: Insufficient Expert Testimony In this case, the bank bore the burden of proving matters related to the credit card system’s manufacture, design, security, and operation, as required under the Consumer Case Procedure Act B.E. 2551 (2008). To meet this requirement, the bank presented testimony from two employees in its credit card department regarding ’security measures and issuance procedures. However, the Supreme Court found these witnesses unqualified as experts, as they did not present technical or academic evidence and did not possess specialized expertise in credit card technology. As a result, their testimony failed to establish that the bank’s credit card technology was sufficiently secure against fraudulent misuse. Finding 2: Contradictory Terms and Conditions The bank’s own credit card terms and conditions included a provision acknowledging that despite the card’s EMV security standards, cardholders must still exercise caution to prevent unauthorized access. The Supreme Court interpreted this clause as an explicit admission that credit card systems remain vulnerable to hacking and fraud, even with high-level security measures in place. This acknowledgment undermined the
Read More
February 3, 2026
Thailand’s alternative dispute resolution (ADR) landscape has evolved significantly over the past decade. Legislative reforms such as the Dispute Mediation Act and expanded court‑annexed mediation have strengthened non‑litigious options, while institutional choices have broadened. Parties can now choose between the Thai Arbitration Institute (TAI), the Thailand Arbitration Center (THAC), and a growing number of sector‑specific dispute forums. For businesses, these choices matter. Each forum has different rules, administration, costs, speed, and enforcement mechanisms. These factors can directly impact commercial leverage, recovery outcomes, and business continuity. Choosing the right forum and drafting an effective dispute resolution clause can materially influence how a dispute is resolved. This article outlines the practical differences between Thailand’s leading alternative dispute resolution forums, explains when each is likely to deliver the most value, and offers drafting and strategy tips to embed those advantages into your dispute resolution clauses. Why ADR Is Gaining Traction in Thailand Thai policy increasingly supports the resolution of civil and commercial disputes through ADR. Recent amendments to the Civil Procedure Code now provide for court-supervised pre-action and in-case mediation. This type of mediation has its advantages: it suspends limitation periods, involves no court fees, and can conclude with a consent judgment that is immediately enforceable and subject to only limited grounds of appeal. In parallel, the Mediation Act supports out‑of‑court mediation for qualifying disputes within defined subject‑matter and monetary thresholds. Valid settlement agreements reached under this law may be enforced through a streamlined court process. Thailand’s arbitration framework has also matured into a reliable, pro‑enforcement framework under the Arbitration Act, which closely follows the UNCITRAL Model Law and applies to both domestic and international cases, so cross‑border users see familiar rules. As Thailand is a signatory to the New York Convention, Thai courts generally recognize and enforce foreign awards subject only
Read More