Hire-Purchase (Civil and Commercial Code and Consumer Protection controlled-contract notifications)

Civil and Commercial Code s.572: hire-purchase (เช่าซื้อ) is a contract under which the owner lets property on hire and promises to sell it to the hirer, or that ownership will pass to the hirer, on condition that the hirer pays an agreed number of instalments. A hire-purchase contract that is not made in writing is void.

Civil and Commercial Code s.573: the hirer may terminate a hire-purchase contract at any time by returning the property to the owner at the hirer's own expense.

Civil and Commercial Code s.574: if the hirer defaults on two successive instalments, or breaches a material part of the contract, the owner may terminate, the instalments already paid are forfeited to the owner, and the owner is entitled to resume possession. For default on the last instalment the owner may do so only after one instalment period has lapsed. For a controlled-contract car or motorcycle hire-purchase the notification's own termination term (three consecutive instalments plus written notice, see the CPB-4-4 entry) applies.

Consumer Protection Act B.E. 2522 s.35 bis: where a sale or service contract must (or customarily does) take written form, the Contract Committee may designate the business as a controlled-contract business. Contracts with consumers must then use the necessary terms (without which the consumer would be unreasonably disadvantaged) and must not use unfair terms, as the Committee prescribes. Under s.35 ter a contract that omits a required term is deemed to contain it, and under s.35 quater a prohibited term is deemed absent.

The Contract Committee notification of B.E. 2561 designates hire-purchase of cars and motorcycles as a controlled-contract business (made under s.35 bis, in force from 1 July 2018, repealing the B.E. 2555 and B.E. 2558 versions; contracts made earlier under the B.E. 2555 notification remain under it). Item 3 defines the business as an owner letting its own car or motorcycle to a natural person, with a promise to sell or pass ownership on payment of instalments. 'Car' means a private passenger or private goods vehicle used for personal purposes only, not for transport, the hirer's trade or business, or hire.

Item 4 requires the contract to be in clear, legible Thai in type not smaller than 2 mm and not more than eleven characters per inch. Item 4(1) requires it to state the make, model, engine and chassis numbers, whether the vehicle is new or used and its mileage, and any encumbrances; the payment schedule and calculation method; a table of the hirer's debt for each instalment (principal, interest, VAT and the outstanding balance); and the debt-collection fees and how they are calculated.

Item 4(1) requires the contract to state the cash price, booking amount, down payment, remaining cash price, the flat interest rate per year, the number of instalments, the total hire-purchase amount, the amount of each instalment, the VAT in each instalment and the due dates. When the flat rate is stated, the contract must also state the effective interest rate per year (Effective Interest Rate), which item 3 defines as a reducing-balance rate calculated on the outstanding principal each instalment, as in a housing loan.

Under item 4(4), where the hirer has defaulted on three consecutive instalments AND the owner has given written notice requiring payment of the overdue instalments within at least thirty days from the date the hirer receives it, and the hirer has not complied, the owner has the right to terminate. This is more protective than the Civil and Commercial Code s.574 default of two successive instalments; for a car or motorcycle contract within the notification, the notification term is the required contract term (Consumer Protection Act s.35 ter).

After termination and repossession, before selling the vehicle by auction or other suitable public sale the owner must (a) give the hirer at least seven days' written notice of a right of first purchase for the outstanding debt (with the item 4(10) discount) and, if unused, give the guarantor at least fifteen days' notice to exercise it; (b) give the hirer and guarantor at least seven days' written notice before the sale stating the seller, date and place. If the price exceeds the outstanding debt the owner must return the surplus to the hirer; if it is less the hirer is liable for the shortfall. (c) Within fifteen days of the sale the owner must notify the hirer of the sale details, expenses (only as actually, economically and reasonably spent) and the surplus or shortfall. The outstanding debt here means the overdue and not-yet-due instalments plus penalty and collection fees actually, economically and reasonably incurred. Item 4(6): the owner may not bid, directly or indirectly.

If the hirer wishes to pay the whole hire-purchase amount in one payment to close the account, the owner must give a discount of not less than 50 per cent (ร้อยละห้าสิบ) of the hire-purchase interest not yet due, calculated under the accounting standard on leases.

Where a guarantor is required, item 4(11) requires the guarantee to carry a front-page Thai-language warning whose heading 'คำเตือนสำหรับผู้ค้ำประกัน' is in bold type not smaller than 4 mm, with the body not smaller than 2 mm (the wording is in an annex to the notification). The guarantor is notified before the repossessed vehicle is sold and has the right of first purchase (item 4(5)); notices go by registered post with return receipt to the address in the contract (item 4(9)); and under item 5(3) the owner may not require the hirer to replace the guarantor except on the guarantor's death, bankruptcy or incapacity.

Item 5 bars terms that: shift pre-contract vehicle charges to the hirer; set a late-payment penalty above the effective interest rate plus 3 per cent a year (ร้อยละสามต่อปี), and in any case above 15 per cent a year (ร้อยละสิบห้าต่อปี); make the hirer pay the full hire-purchase price if the vehicle is lost, destroyed, seized or forfeited without the hirer's fault; make the hirer pay anything on termination and repossession other than penalty, collection fees and remaining VAT limited to costs actually, economically and reasonably incurred; make the hirer accept an assignment of rights or extra burdens without written consent; or let the owner charge amounts beyond those the notification allows.