Construction Litigation in Thailand. Construction projects in Thailand—whether high-rise condominiums, resorts, or infrastructure—are complex undertakings involving multiple parties, large sums, and technical risks. Unsurprisingly, disputes frequently arise over delays, defective works, payment claims, and termination. Unlike routine commercial litigation, construction disputes often involve layers of contracts, technical evidence, and overlapping statutory frameworks. This article explores the legal framework, common dispute types, procedural aspects, and strategies that contractors, developers, and investors should understand in navigating construction litigation in Thailand.
1. Legal Framework
Civil and Commercial Code (CCC)
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Governs contracts for hire of work (Sections 587–607).
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Defines rights and obligations of contractors and employers, including warranties for defects and liability for delay.
Building Control Act B.E. 2522 (1979)
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Regulates permits, standards, and compliance in construction. Disputes may arise where projects breach zoning or building rules.
Arbitration Act B.E. 2545 (2002, amended 2019)
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Provides a framework for arbitration, which is common in large construction disputes.
Public Procurement and Government Contracts Act B.E. 2560 (2017)
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Governs disputes involving state construction projects.
2. Common Causes of Construction Disputes
A. Delays
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Failure to complete within contract deadlines is the most frequent source of litigation.
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Employers often impose liquidated damages for each day of delay. Contractors counterclaim citing employer-caused delays, late drawings, or force majeure.
B. Payment and Variation Claims
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Contractors sue for unpaid progress payments or extra costs from variations.
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Employers argue that variations were unauthorized or that works are defective.
C. Defective Works
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Employers claim against contractors for poor workmanship or non-compliance with specifications.
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CCC Section 600 imposes liability for defects discovered within a certain period after acceptance.
D. Termination of Contract
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Disputes occur when one party terminates citing fundamental breach.
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Courts assess whether termination was lawful and what damages flow.
E. Subcontractor and Supply Chain Conflicts
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Subcontractors who are unpaid may sue contractors, but generally have no direct contractual claim against the employer.
3. Delay and Liquidated Damages
Thai law respects liquidated damages clauses (called penalties), but courts can reduce them if excessive relative to the employer’s legitimate interest. For example, if delay damages exceed actual loss or appear punitive, a judge may scale them down. To enforce liquidated damages, employers must prove (i) the delay, and (ii) that it was attributable to the contractor, not excused by employer acts or force majeure.
Contractors often defend delay claims by producing site diaries, correspondence, and expert reports showing late instructions, unforeseeable ground conditions, or governmental restrictions.
4. Defects and Warranty Periods
Under the CCC:
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Contractors are liable for defects that reduce the value or fitness of the work.
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For immovable property (buildings), contractors may be liable up to 10 years for major structural defects.
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Employers must notify defects promptly upon discovery to preserve rights.
Disputes often hinge on whether defects are design-related (employer’s responsibility) or workmanship-related (contractor’s responsibility). Independent engineering experts play a key role in litigation.
5. Termination and Restitution
Termination clauses in Thai construction contracts allow employers to take over works upon contractor default. However, wrongful termination can expose the employer to damages for lost profits and wasted costs.
Courts assess:
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Was the breach fundamental enough to justify termination?
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Did the terminating party follow contractual notice and cure procedures?
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What restitution or compensation is owed for work already performed?
6. Procedural Aspects of Litigation
Civil Courts
Most construction disputes are filed in the Civil Court or specialized regional Civil Courts. Complex disputes may go to the Civil Court for Corruption and Misconduct Cases if public officials are involved.
Evidence
Construction litigation is evidence-heavy:
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Contracts, drawings, and bills of quantities.
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Site reports, variation orders, correspondence.
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Expert testimony (engineers, surveyors, quantity surveyors).
Thai courts rely heavily on court-appointed experts, though parties can present their own as well.
Duration
Litigation can take 2–4 years through appeals. For high-value projects, parties often prefer arbitration for speed and confidentiality.
7. Arbitration in Construction Disputes
Many standard form contracts (e.g., FIDIC used in international projects) specify arbitration.
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Thailand is a party to the New York Convention, so foreign arbitral awards are enforceable.
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The Thailand Arbitration Center (THAC) and Thai Arbitration Institute (TAI) administer construction cases.
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Arbitration allows selection of technical arbitrators with construction expertise, which can be critical in complex disputes.
8. Real-World Examples
Example 1: High-Rise Delay Dispute
A contractor delayed completion of a condominium by 12 months. The employer claimed THB 50 million in liquidated damages. The contractor showed that six months of delay were due to late government permit approvals. The court enforced damages but reduced them to THB 25 million.
Example 2: Defective Hotel Works
A hotel owner discovered water leakage within two years of completion. Expert inspection revealed improper waterproofing. The contractor was ordered to repair defects and pay damages despite having handed over the project, as the defects were latent.
Example 3: Termination of Infrastructure Project
A state agency terminated a highway contractor for alleged abandonment. The contractor argued the agency withheld payments. The Administrative Court held termination unlawful and awarded damages for lost profits plus reimbursement of performance guarantees.
9. Preventive Measures to Reduce Litigation
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Detailed Contracts: Clear allocation of risks, defined procedures for variations and extensions of time.
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Regular Documentation: Maintain site diaries, progress photos, and meeting minutes.
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Prompt Notices: Send timely written notices for delays, force majeure, or defective instructions.
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Dispute Boards: Large projects sometimes use dispute adjudication boards to resolve issues before escalation.
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Insurance and Performance Bonds: Ensure adequate coverage to mitigate risk if disputes lead to financial loss.
10. Trends and Outlook
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Rise in Arbitration: Large-scale infrastructure projects increasingly refer disputes to arbitration under international rules.
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Government Contracts: Public Procurement Act reforms are reshaping how disputes with state entities are resolved, emphasizing transparency.
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COVID-19 Legacy: Pandemic-related delays have tested force majeure clauses, with mixed results depending on drafting.
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Technology Evidence: Drone surveys, digital site logs, and BIM models are being used more often in court and arbitral proceedings.
Conclusion
Construction litigation in Thailand combines statutory rules from the CCC, procedural requirements of the courts, and highly technical factual disputes. Delays, defective works, and payment disagreements dominate, with remedies ranging from damages to forced rectification or termination. While Thai courts provide established routes for enforcement, arbitration is often favored for complex, high-value disputes.
The key to minimizing disputes is rigorous contract drafting, disciplined record-keeping, and timely communication. When disputes do arise, parties must be prepared for a process that hinges as much on technical expertise as on legal argument. For contractors, developers, and investors alike, understanding these dynamics can mean the difference between a costly stalemate and a manageable resolution.