REALWorld Law

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

The Civil and Commercial Code is generally regarded as the main source of law governing and regulating the specific contracts including construction contracts for building works. Its provisions stipulate the duties and liabilities of the contracting parties who enter into construction contracts.

In addition, the Building Control Act B.E. 2522(1979) and its accompanying ministerial regulations (collectively, the BCA) are the specific sources of law governing the process of application for building construction permits, restrictions on the construction of the building, safety, fire protection and various other aspects. Therefore, the BCA must be carefully considered by the developers or the contractors before commencing construction of a building.

The Town Planning Plan B.E. 2518(1975) and its accompanying ministerial regulations are the specific sources of laws governing town planning and the utilization of the land. The National Environmental Quality Act B.E. 2535(1992) and its accompanying ministerial regulations are the specific sources of laws governing environmental quality and environmental impact assessments. Consequently, it is also necessary for those laws to be considered by developers and contractors before planning the development of a project.

Announcement of the National Council for Peace and Order No. 3/2559 suspends certain restrictions under the general town and country plans to exclude the enforcement of the law on town planning and building controls in the area of special economic development zone by allowing the construction of industrial plants in areas declared as Special Economic Zones (SEZs). The provinces have been designated as SEZs are Chiang Rai, Kanchanaburi, Mukdahan, Nakhon Phanom, Narathiwat, Nong Khai, Sa Kaeo, Songkhla, Tak and Trat. This Announcement is however subject to change upon the authority’s discretion.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Pursuant to the Building Control Act, it is a mandatory requirement to obtain a Building Permit or Letter of Notification for the Construction of a Building (LNC) prior to the construction of a building.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In particular, the Building Control Act (BCA) stipulates the application process for a building construction permit, restrictions on the construction of the building, safety, fire protection and various other matters. The BCA therefore must be carefully considered by developers or contractors before commencing the construction of a building.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Certain projects or developments require that an environmental impact assessment report (EIA report) is approved before construction of a building can be commenced. This is in accordance with the applicable Notification issued by the Ministry of Natural Resources and the Environment regarding ‘Types and Sizes of Projects or Operations which are required to prepare Environmental Impact Assessment Report which is enacted under the National Environmental Quality Act B.E. 2535(1992).

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Utility arrangements are normally made prior to the construction of a building with utility suppliers. In Thailand, most utility suppliers are operated by public entities therefore, applications for connection to utilities will be dealt with in accordance with the rules and regulations of the relevant authority.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In principle, the terms and conditions of the construction contract govern the design or carrying out of building works to the extent that such terms and conditions are not expressly prohibited by law and are not impossible or contrary to public order or good morals.

Unless the construction contract states otherwise, the following provisions of the Civil and Commercial Code apply in relation to the construction of a building:

• Section 593: If the contractor does not commence work in accordance with the contract terms, or if, without fault on the part of the employer, there is a delay in the commencement of the work in such a manner that it can be foreseen that the work will not be finished within the agreed period, the employer is entitled to rescind the contract without waiting for the time agreed upon for delivery.
• Section 594: When it is possible to foresee with certainty, whilst the work is proceeding, that, due to default by the contractor, the work will be executed in a defective manner or contrary to the terms of the contract, the employer may require the contractor by notice to make good the defect or to comply with the terms of the contract within a reasonable time (to be fixed in the notice) failing which the employer is entitled to have the work repaired or continued by a third person at the risk and expense of the contractor.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

There are various methods of payment, each of which is stipulated in the construction contract.

The payment will generally be made on an installments basis in connection with the progress of each stage of the works. Once the works have been inspected, the payment to the contractor will be made in accordance with the payment dates agreed upon and outlined in the construction contract. In addition, unless otherwise provided in the contract, a retention is usually required in order to guarantee the remediation of any defects incurring after the date of delivery of the works.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Yes. The construction contract will usually set out the specific date for completion of the works. If the contractor fails to meet the deadline, a default or breach of contract will occur. The employer subsequently is entitled to claim for any damages for late completion.

In addition, the contract will generally fix the penalty for late completion at a specific amount on a daily basis, and if the limitations on such penalties are reached, the employer is entitled to terminate the construction contract and claim any damages incurred due to the termination of the construction contract.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Variations to the scope of the works can be made pursuant to the parties agreement in the construction contract.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In Thailand, the law does not stipulate what has to be achieved before 'completion' of the construction works; this depends on the terms and conditions under the construction contract mutually agreed upon by the parties. In practice, the acceptance by the employer will be an official indication of completion of the construction works pursuant to the construction contract. In this regard, the employer must exercise caution on the acceptance of the delivery of the work because the contractor is not liable for any defect after acceptance by the employer, whether expressly or implied, unless the defect could not have been discovered before acceptance or the defect was concealed by the contractor pursuant to Section 598 of the Civil and Commercial Code.

In addition, unless otherwise provided in the contract, the contractor is liable for any defect which appears within five years from the date of delivery if the work is for the construction of a building pursuant to Section 600 of the Civil and Commercial Code.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Under the Civil and Commercial Code, either party may take legal action against the defaulting party for breach of contract at the date of the breach of contract. The Civil and Commercial Code does however impose prescription periods upon the cause of action as follows:

Two years

• Claims by merchants, industrialists, manufacturers, artisans and those who practice industrial arts, for the delivery of goods, performance of work and care of others' affairs, including disbursements, unless the service is rendered for the business of the debtor
• Claims by employees, whether they be permanent, temporary or day workers, and apprentices, for wages or other remuneration which are not fixed, including disbursements, or claims by employers for advances made upon such claims
• Claims by engineers, architects, auditors or those engaged in other independent professions, for services including disbursements or claims by the employer for advances made upon such claims

Five years

• Arrears of interest
• Sums payable for the purpose of paying off the principal in installments
• Arrears of fixed salaries paid periodically, annuities, pensions, allowances for maintenance and all other periodical payments

Furthermore, a claim for damages arising from a wrongful act is barred by prescription after one year from the day when the wrongful act and the person bound to make compensation became known to the injured person, or ten years from the day when the wrongful act was committed. In addition, no action against the contractor can be brought later than one year after the defect appeared.

If no other period of prescription applies, the law provides a ten year prescription period by default.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In principle, the developer is liable for damages or losses suffered by the end user according to the relevant contractual relationship. Notwithstanding this, the developer, unless the contract provides otherwise, is only liable for defects appearing within five years from the date of delivery, if the work involves the construction of a building and is based upon the hire of work or service contract, pursuant to section 600 of the Civil and Commercial Code. The prescription period will be reduced to one year in case where the agreed contract is a sale and purchase agreement.

In addition, the end user may claim for compensation against the developer for damages incurred if the developer, willfully or negligently, unlawfully injures the end user’s life, body, health or property under the law of tort/a wrongful act pursuant to section 420 of the Civil and Commercial Code. In particular, under section 434 of the Civil and Commercial Code, if the damage is caused by reason of the defective construction or insufficient maintenance of a building, the possessor of the building is bound to make compensation; but if the possessor has used proper care to prevent the damage from occurring, the owner is bound to make compensation. In addition, if a third party caused the damage, the possessor or owner may seek indemnity from such third party.

By law these liabilities may not be excluded.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In principle, end users who are not parties to the construction contract are not entitled to directly claim damages from the architect, designers, contractors or sub-contractors.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

In principle, third parties who are not the parties under the construction contract are not entitled to directly claim against the original designers and contractors involved in the design and construction of the project. Nevertheless, the third parties are able to claim against the developers if the contract allows or under the law of tort/wrongful act for any damages incurred pursuant to section 420 and 434 of the Civil and Commercial Code. The developer may then have recourse against those who are directly liable to the developer.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

A specialist court for construction disputes does not exist in Thailand. Claims relating to construction disputes are submitted to the court with territorial jurisdiction covering the defendant, or to the court within territorial jurisdiction over the place in which the cause of action arose, in which case it is unnecessary for the defendant to have a domicile in Thailand.

Court decisions may be appealed. Thailand's court system has three levels: the Court of First Instance, the Court of Appeal and the Supreme Court. If the parties disagree on the judgment rendered by the Court of First Instance, either party may appeal the decision to the Court of Appeal. Similarly, either party may appeal the judgment of the Court of Appeal to the Supreme Court.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

Construction contracts commonly contain an arbitration clause for the settlement of disputes arising from the construction contract. The arbitration system allows the parties to appoint specialist arbitrators. Arbitration proceedings are normally faster than litigation proceedings through the judicial system, and arbitration offers confidentiality to the parties. The Arbitration Act B.E. 2545(2002) stipulates arbitration procedures under Thai law.

Last modified 19 Jul 2023

Typically, who are the parties to an engineering or construction contract or package of contracts and who is responsible to whom?

ADR is an optional, though not yet common, proceeding for the settlement of disputes arising from construction contracts and may include various types of resolution such as mediation, conciliation and compromise.

Thailand is continuing to recognize the significance of ADR proceedings. To this end, the Alternative Dispute Resolution Office was established to promote, support and advise on ADR proceedings, though Thai law does not require submission to ADR.

Last modified 19 Jul 2023