Thai Construction Contracts: Key Clauses to Know

TL;DR

Thai construction contracts are governed by Civil and Commercial Code B.E. 2468 (1925) §587-607 (hire of work) plus standard-form contracts. Government projects use the Por.Ror. (provincial) and standard government-procurement forms under the Public Procurement Act B.E. 2560 (2017). Private projects commonly use bespoke contracts; foreign-invested projects often adopt FIDIC Red / Yellow / Silver Book with Thai-law-compatible amendments.

Key Clauses

Performance Bond / Retention

• Performance bond commonly 5-10% of contract value.
• Retention 5-10% per progress payment, released at handover / DLP.
• Bank guarantees vs cash retention.

Insurance

• Contractor's All-Risks (CAR).
• Workmen's Compensation (mandatory).
• Third-party liability.
• Professional indemnity (for design-build).

Common Mistakes

• No Variation Order procedure — disputes on scope creep.
• Unbalanced LDs — courts may reduce under CCC §379.
• Skipping Building Control Act compliance check.

FAQs

1. FIDIC vs Thai standard?

FIDIC familiar to international parties; Thai-law clauses needed for compatibility.

The Legal Backbone: Hire of Work

A construction contract in Thailand is a hire-of-work contract under the Civil and Commercial Code (Sections 587 onwards): the contractor undertakes to achieve a result (the completed works) and the employer to pay for it. The Code supplies default rules on acceptance of the work, defects, and the employer's right to a price reduction or to have defects remedied, but well-drafted contracts displace these defaults with clearer mechanisms. Because the contractor's core obligation is a result, unclear scope and specifications are the biggest source of dispute — a precise scope, drawings and specification schedule matters more than any boilerplate clause.

Clauses That Decide the Outcome

The clauses that most often determine who bears risk are: the pricing basis (lump sum versus measured/re-measurement); time, milestones and extension-of-time grounds; a clear variations mechanism so change orders are priced and instructed in writing; interim payment and certification with retention; a defects-liability period; and liquidated damages for delay. Note that a Thai court can reduce a penalty or liquidated-damages amount that is disproportionately high under CCC Section 383, so an inflated LD figure is not guaranteed to be enforced in full. Compliance with the Building Control Act B.E. 2522 (1979) (permits, approved drawings, supervision) should be a contractual condition, and the dispute-resolution clause — arbitration is common for larger projects — should specify seat, rules and language.

2. Can I withhold payment for defects?

Usually only to the extent the contract's certification and retention mechanism allows; withholding beyond that can itself be a breach, so follow the contractual defects and set-off procedure.

Related Reading

• Thai Arbitration
• Property Law Hub
• Construction & Building Law