Thailand: New Controls to be Introduced for Residential Building Construction Agreements

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December 6, 2016

Effective from January 1, 2017, all contracts to construct residential buildings will be subject to contract control under the Consumer Protection Act B.E. 2522 (1979) and the Royal Decree Prescribing Bases and Procedures in Relation to a Business that is Subject to Contract Control and Description of a Contract B.E. 2542 (1999).

Under a new notice published in the Government Gazette on November 14, 2016 (officially titled the “Notice of the Contract Committee Re: Prescribing the Business of a Residential Building Construction as a Business that is Subject to Contract Control B.E. 2559 (2016)”), any contract between a “business operator of a residential building construction” and a “consumer” for the construction of a residential building must contain all of the following terms and conditions:

  1. Place of contract, date, the purpose of the building usage, design of the building, place of construction, and the details of both parties (e.g., name, address, identification/corporate registration number)
  2. Price (inclusive of value added tax), and an obligation to find materials and equipment in accordance with the standards specified in the contract
  3. Bill for quantity and price of materials
  4. Payment installments
  5. Period for obtaining the construction permit
  6. Period of construction
  7. The business operator’s warranty (five years for a structure and one year for non-structural parts)
  8. The consumer’s right to amend the construction plan and the price for the amended plan
  9. The business operator’s covenant to comply with the construction permit and plan, which has been approved by the government authority and the legal/professional standard
  10. Any default terms and conditions for consumers, which must be shown either in red, bold, or italics, which differ from the normal characters, and the business operator must also give the consumer a rectification period of no less than 30 days, before terminating the contract
  11. The consumer’s right to terminate the contract, or a fine for delaying the construction period
  12. A force majeure  clause

Additionally, none of the following terms and conditions can be included in any provision within the contract:

  1. Waiver or limitation of the business operator’s liability
  2. Waiver of the business operator’s written termination notice, or termination without any fault of the consumer
  3. The business operator’s right to claim for payment before the due date, without the consumer’s default or breach of contract
  4. The business operator’s right to amend the plan, price, or any conditions in the contract, in a manner that would place an additional burden on the consumer, without the written consent of the consumer
  5. Non-refundable payment clause
  6. A requirement to obtain the business operator’s permission or consent prior to the consumer’s inspection of the construction site
  7. The business operator’s assignment of its obligations to others, without the consumer’s consent
  8. A term granting the business operator ownership of any building,  material, or equipment that is procured or paid for by the consumer
  9. The consumer’s deemed acceptance of the work, in the event that the consumer fails to inspect and accept the work within the date prescribed in the contract

According to the Consumer Protection Act, if a business operator fails to deliver a contract containing contract terms in accordance with the above terms and conditions, the business operator will be subject to a fine of not exceeding THB 100,000, or imprisonment for a term not exceeding one year, or both.

If you have any questions about the permissible terms and conditions within residential building construction agreements, please contact Chaiwat Keratisuthisathorn, attorney-at-law in the Tilleke & Gibbins corporate and commercial group, at +66 2056 5507 or chaiwat.k@tilleke.com.