An Excerpt on A Primer of Thai

Business Law (Fourth Edition)

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Chapter 1
Some Words and Their Meanings

Lawyers use words that are difficult for people to know their exact
meanings. In this Chapter, I will cover certain words which,
knowing their legal meanings, are essential to learning about Thai
business law. Knowing and understanding the meanings of these
words will provide the reader with a good foundation for the topics
covered in the rest of this book.

Note: The Thai language of these words and other important words
in this book can be found in the Glossary of this book.

1. Thing and Property (137 – 138)

1.1 In legal terms, a thing is a corporeal object i.e. has a form,
shape, appearance and it is tangible. For example, table,
computer, car etc.

However, a property includes things and incorporeal objects

that are capable of having a value and can be appropriated,
carried or possessed.

Therefore, a property can either have a shape and be tangible or

not have a shape and be intangible, for example, personal rights,
real rights, a software program, intellectual property i.e.
copyright, patent, trademark etc.
 6

Things (139 – 142)

1.2 Things can be classified into: Immovable things and movable

things.

Immovable things (Also known as real estate or real property)

(a) Land;

(b) Things fixed permanently to land, for example, trees, bridge,

monument etc.;

(c) Things forming a part of land, for example, river, rocks etc.; and

(d) Including rights connected with land, for example, ownership ti-
tle, possessory right, servitude right over land etc.

Movable things

(a) Things other than immovable things; and

(b) Including rights connected with movable things, for example,

ownership title of a bicycle, right to possess, use or receive ben -
efits from a computer, copyright, rights in a trademark.

1.2.1 The differences between an immovable thing and a

movable thing are:

(a) An immovable thing like a plot of land has an owner, the plot of
land either belongs to a private owner or to the state, but a mov-
able property may have no owner;
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(b) Ownership title of an immovable thing can be acquired by open

and peaceful possession of the thing for an uninterrupted pe-
riod of 10 years with the intention to be its owner. For a mov-
able thing all conditions remain the same except that the posses-
sion period is 5 years;

(c) Proof of ownership in an immovable thing is by registration, for

example, registration of land ownership title at the Land Office.
Proof of ownership in a movable thing is by possession, for ex-
ample, possessing and using a bicycle; and

(d) A juristic act or legal act (see 4. below) to acquire rights in an

immovable thing has to comply with a legal form, for example,
a contract on leasing land for more than 3 years must be made in
writing, signed by the parties to the contract and registered at the
Land Office. In general, there is no need to comply with a legal
form for movable things.

1.2.2 Things that can be divided and things that cannot be

divided

Things that can be divided are things that, when it is divided, do not
affect its form or part except causing a reduction in its quantity, for
example, dividing a bag of rice, cutting out a piece of cloth etc.

2 kinds of things that cannot be divided:

(a) Things that cannot be divided due to its condition or nature. Any
division of the thing will cause a change in the condition or na-
ture of the thing, for example, house affixed to land.
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(b) Things which are unlawful to divide. For example, a company

share.

1.2.3 An accessory (147)

An accessory is a movable thing that serves a principal thing. The

principal thing, however, can be immovable or movable. For
example, a mouse (accessory) plugged into a computer (principal
thing).

The accessory and the principal thing must be from the same owner.

The accessory is attached permanently to the principal thing for its

management, use or preservation and the accessory is brought by
the owner into relation with the principal thing.

While an accessory can be temporarily severed from the

principal thing, it does not stop serving the principal thing.

Unless agreed otherwise, a sale of the principal thing is sale of the

accessory as well.

1.2.4 Fruits (148)

A fruit from a thing can come in 2 forms, a natural fruit or a legal

fruit.

Natural fruit – a natural offspring of and is obtained from a thing in the

normal possession e.g. apples, lemons, puppies, kittens, eggs etc.

Legal fruit – interest or thing obtained periodically by someone from

another person’s use of their thing. The fruit is calculated and may
 9

be acquired day by day. For example, interest received by a lender

(creditor) from a loan of money contract, rent received by a land
owner (lessor) from a lease of land contract, dividends paid to a
shareholder by a public company limited etc.

2. Person (15 and 65)

(a) Natural person – A human person with the full completion of
birth as a living child and ending with death.

(b) Juristic person – A non human person that comes into existence
by virtue of the law. A juristic person is formed by natural per-
son collectively and is registered as according to law. Upon reg-
istration, a juristic person (For example, a foundation, an associ-
ation, a company limited, a public company limited etc.) is con-
sidered as a separate person or entity from its members or share-
holders.

3. Rights (138, 1298 and 1600)

Rights are the benefits that are verified and protected by the law.

The business law provides two types of rights to a natural person

and a juristic person:

3.1 Personal rights are rights to do something or refrain from

doing something. For example, the right of a creditor to request
for payment of money debt from a debtor, the right for a land
owner to request for payment of rent from the lessee, the right of
a creditor to claim against a debtor in court for default in
payment of debt etc. This kind of right arises from a juristic
(legal) act, for example, a contract or a tort. Personal rights are
 10

only enforceable against a debtor, debtor’s heir(s) or

successor(s) of the debtor.

Note: Debtor here includes anyone who has an obligation to

perform or to refrain from performing. It does not only refer
to a debtor of a money debt.

3.2 Real rights are rights in property which arise from specific
provision of the law. Real rights in property cannot be provided
through a juristic act from a person, for example, a contract by
two parties agreeing to provide for real rights in property. Real
rights in property are binding on everyone, not just the parties to
the contract. For example: (i) a lessee who leased a plot of land
and had registered the lease at the Land Office, has the real
rights in the leased property to possess and to use the property
and has the right to prevent anyone from using the property; or
(ii) a person who has ownership tile of a property has the real
rights in property to prevent anyone from owning or using the
property.

Other examples of real rights in property: right to a servitude or

right of way over land, right to mortgage a plot of land,
copyright or right in a trademark.

4. A Juristic Act (149 – 153)

4.1 A voluntary juristic (legal) act whereby its purpose “is to
establish between persons juristic (legal) relations, to create,
modify, transfer, preserve or extinguish rights” Section 149
of the Civil and Commercial Code of Thailand (“CCC”).
 11

Therefore, the elements of a juristic (legal) act from a person are:

(a) Having a declaration of intention to do a juristic (legal) act;

(b) A voluntary act;

(c) A lawful act;

(d) The act has the objective to establish legal relations between per-
sons;

(e) Having an objective to create, modify, transfer, preserve or ex-

tinguish rights; and

(f) The act cannot be an impossible act, for example, a contract

whereby a contractor agrees to catch a dragon for the employer.

4.2 The different types of juristic (legal) acts are:

3 One party juristic (legal) act, for example, making a will, setting
up a foundation etc.

4 Two parties juristic (legal) act, for example, formation of a con-

tract.

5 Juristic (legal) acts that are: effective when living, for example,
a contract; or effective for the dead, for example, a will.

6 Juristic (legal) acts with remuneration or without remuneration,

for example, a gift contract. Remuneration can be in the form of
benefit, property or payment of money.
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(e) Juristic (legal) acts with a time condition or without a time con-
dition.

4.3 Important juristic (legal) acts

There are many kinds of juristic (legal) acts, however, the law
provides for certain important juristic acts:

(a) Submission of property for sale or lease;

(b) A written and signed contract, for example, a to sell and to buy
house and land contract, sale of moveable property contract (sale
price is 20,000 Baht or more) etc.;

(c) A written and signed document before a government official, for

example, a sale and purchase of land contract signed before an
official of the Land Office etc;

(d) A written document and its registration before a government of-

ficial, for example, a sale and purchase of land contract or a
mortgage contract registered in the land title deed before an offi-
cial of the Land Office; and

(e) Other special form of documents

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Chapter 2

PARTNERSHIPS and COMPANIES

1. Introduction
Operating a business with the objective to gain profit can take two
forms:

(a) A sole proprietorship i.e. a business owned by a natural person

with unlimited liability; and

(b) Jointly with other persons i.e. form and register, jointly with
other natural person or juristic person, for example, a partner-
ship or a company.

A partnership or company, upon registration being made at the

Ministry of Commerce, constitutes a juristic (legal) person
separate from the partners or the shareholders of whom it is
composed.

Note: It is not necessary to join with other person(s) if you want to

have complete control over your business and bear all its risk
exposure. However, joining with other person(s) allows you to share
the risk exposures in the business with other people and increase the
capital investment into the business.
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2. Jointly With Other Persons

2.1 Partnerships

(a) Ordinary partnership (1025)

Ordinary partnership – A kind of partnership in which all the

partners are jointly and unlimitedly liable for all the obligations of
the partnership. For example: If A and B are partners in an ordinary
partnership and this ordinary partnership borrows 500,000 Baht
from a bank, both A and B are jointly and unlimitedly liable to
repay the loan to the bank.

(b) Limited partnership (1077)

Limited partnership – A kind of partnership in which there are:

One or more partners whose liability is limited to such amount as

they may respectively undertake to contribute to the partnership;
and

One or more partners who are jointly and unlimitedly liable for all
the obligations of the partnership.

For example: If B and C are partners in a limited partnership and B

and C each contributed 500,000 Baht to the limited partnership. The
limited partnership borrows 1,500,000 Baht from a bank. B liability
to the bank is limited to 500,000 Baht. However, C liability to the
bank is the remaining debt amount of 1,000,000 Baht.
 15

2.2 Companies

There are two kinds of companies:

(a) Company limited; and

(b) Public company limited

2. Company Limited (1096 – 1097)

A company limited is a kind of company which is formed with a
capital divided into shares with equal value per share. The liability
of each shareholder is limited to the amount of money that is
invested by the shareholder to purchase the share(s).

Any three or more natural persons can, by subscribing their

names to a Memorandum of Association and registering it at the
Registrar of Commercial Registration Department, Ministry of
Commerce, promote and form a company limited.

(b) Public Company Limited

A company which is formed or converted from a company limited

and the capital of this company is divided into shares and offered to
the members of the public. The shareholders’ liability is limited to
the amount of money invested by them in the shares.

Any fifteen or more natural persons can, by subscribing their

names to a Memorandum of Association and registering it at the
Registrar of Commercial Registration Department, Ministry of
Commerce, promote and form a public company limited.
 16

There are two kinds of public company limited:

(a) Listed public company limited = a public company limited that

is registered and listed on the Stock Exchange of Thailand
(“SET”) for their shares to be traded there.

(b) Unlisted public company limited = a public company limited

that is NOT registered and listed on the SET.

Main Players of a Company

(a) Shareholder

What is a shareholder ?

A shareholder owns share(s) in a company, the purchase price of the

share(s) paid by the shareholder to the company represents the
shareholder’s contribution into the capital of the company. As proof
of the shareholder’s contribution, the company issued the
shareholder with a share certificate stating, among other details, the
number of shares held and price paid by the shareholder.

As a result, a shareholder together with the other shareholders of the

company can be considered as the owners of the company.

(b) Director

What is a director ?

A director is appointed by the shareholders of the company to

manage the business of the company. Collectively, all the directors
 17

of the company formed the Board of Directors that makes

management decisions on behalf of the company.

The shareholders of a company limited would have to appoint a

director(s). The shareholders of a public company limited would
have to appoint at least five directors and not less than half of whom
must reside in Thailand.

(c) Managing Director

What is a managing director ?

A managing director is the director appointed by the shareholders of

the company to run the daily business operations of the company. In
most cases, he or she is the person who can sign on behalf of the
company in letters, contracts, cheques etc. The company is a juristic
person, not a natural person, therefore it needs someone to represent
its daily actions. Consequently, the managing director is the agent of
the company who acts on its behalf.

The managing director is commonly referred to as the Chief

Executive Officer (CEO), manager, general manager, signing
authority, authorized director etc.

Note: The shareholders of the company can agree to restrict the

power of the managing director to act on behalf of the company. For
example, the managing director can only sign cheques on behalf of
the company up to no more than 500,000 Baht per month.
 18

3. A Foreign or Non Thai Company

What is this ?

According to Section 4 of the Alien Business Operation Act B.E.

2542 (1999) (“ABOA”), a “foreigner” means:

(a) A non-Thai natural person.

(b) A juristic or legal person not formed in Thailand.

(c) A juristic or legal person formed in Thailand with at least half

of its company’s shares held by persons under (a) or (b), or a ju-
ristic or legal person with at least half of its total registered cap-
ital invested by such persons.

(d) A limited partnership or registered ordinary partnership of which

its managing partner or manager is a non – Thai natural person.

(e) A juristic or legal person formed in Thailand having a person

under (a), (b), (c) or (d) holding half or more than half of its
shares; or a juristic or legal person having a person under (a),
(b), (c) or (d) investing half or more than half of its total capital
value.

The ABOA prescribed for three Lists of business activities (See

Appendix at the end of this Chapter) which a “foreigner” cannot
operate unless an Alien Business Operation (“ABO”) License had
been obtained. Business activities under LIST ONE are
prohibited to a foreigner. Therefore, an ABO License cannot be
granted to a foreigner who wants to operate business activities
under LIST ONE. For business activities under LISTS TWO and
 19

THREE, an ABO License is required prior to operating the

business activity(ies).

An application (together with its supporting documents) for the

ABO License can be filed by the foreigner at the Department of
Business Development, Ministry of Commerce. Upon been granted
the ABO License, the foreigner has to pay the granting fee and meet
certain requirements as an ABO License holder e.g. remittance from
outside Thailand of a minimum capital amount.

The word “foreigner” used in the ABOA does not include American
natural persons or American juristic persons who qualify for the
privileges under the provisions of the Treaty of Amity and
Economic Relations B.E. 2509 (1966) between Thailand and the
United States. Therefore, an American owned company
incorporated in Thailand or the branch office of an American
company is permitted to operate any kind of business, just like a
Thai company, except:

(a) Own land;

(b) Engage in the business of inland communications;

(c) Engage in the business of inland transportation;

(d) Engage in fiduciary functions;

(e) Engage in banking and depository functions;

(f) Exploit land or other natural resources; or

(g) Engage in domestic trade in indigenous agricultural products

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The United States is the only country that receives this privilege.

In addition to a company under the protection of the Treaty of Amity,

the provisions of the ABOA also do NOT affect Board of Investment
(“BOI”) promoted companies or export businesses under the law on
the Industrial Estate Authority of Thailand (“IEAT”).

A foreign company under the Treaty of Amity protection, received

BOI promotion status or received written permission to operate an
industry or trade for export under the law of the IEAT shall notify
the Director General of the Ministry of Commerce to request for a
Certificate of ABO.

Other kinds of foreign companies:

(a) Representative Office;

(b) Branch Office; and

(c) Regional Office

(a) Representative Office – An office in Thailand established by a for-

eign company (company incorporated outside Thailand) whereby
the office’s activities in Thailand is limited to mainly acting as a
buying office (buying goods in Thailand) for the foreign company,
carrying out market research and engaging in quality control of the
foreign company’s products or services in Thailand. The Repre-
sentative Office cannot engage in trading activities in Thailand.
This means that it cannot generate income in Thailand. The of-
fice needs to apply for an ABO
 21

License because a Representative Office is regarded as a service

business under List 3 of the ABOA.
(b) Branch Office – A foreign company (company incorporated out-
side Thailand) can operate business in Thailand by e stablishing
a branch office. If a branch office intends to engage in a busi-
ness activity listed under LIST TWO or THREE of the ABOA,
then it must apply for an ABO License prior to operating the
business activity.

(c) Regional Office – An office in Thailand e stablished by a for-

eign company (company incorporated outside Thailand) to su-
pervise and control the company’s affiliates and subsidiaries lo-
cated in Thailand and elsewhere in the region. It cannot gener-
ate income in Thailand as well.
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Appendix
LIST ONE

The businesses not permitted for foreigners to operate due to

special reasons:

(1) Newspaper business, radio broadcasting or television station

business.
(2) Rice farming, farming or gardening.
(3) Animal farming.
(4) Forestry and wood fabrication from natural forest.
(5) Fishery for marine animals in Thai waters and within Thailand
specific economic zones.
(6) Extraction of Thai herbs.
(7) Trading and auctioning Thai antiques or national historical ob-
jects.
(8) Making or casting Buddha images and monk alms bowls.
(9) Land trading.

LIST TWO

The businesses related to national safety or security or affecting arts

and culture, tradition, folk handicraft or natural resource and
environment.

Group 1: The businesses related to national safety or security

(1) Production, selling, repairing and maintenance of:

(a) firearms, ammunition, gun powder, explosives.
(b) Accessories of firearms, ammunition, and explosives.
(c) Armaments, ships, air-craft or military vehicles.
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(d) Equipment or components, all categories of war materials.

(2) Domestic land, waterway or air transportation, including domes-

tic airline business.

Group 2: The businesses affecting arts and culture, traditional and

folk handicraft:

(1) Trading antiques or art objects being Thai arts and handicraft.
(2) Production of carved wood.
(3) Silkworm farming, production of Thai silk yarn, weaving Thai
silk or Thai silk pattern printing.
(4) Production of Thai musical instruments.
(5) Production of goldware, silverware, nielloware, bronzeware or
lacquerware.
(6) Production of crockery of Thai arts and culture.

Group 3: The businesses affecting natural resources or environment:

(1) Manufacturing sugar from sugarcane.

(2) Salt farming, including underground salt.
(3) Rock salt mining.
(4) Mining, including rock blasting or crushing.
(5) Wood fabrication for furniture and utensil production.

LIST THREE

The businesses which Thai nationals are not yet ready to

compete with foreigners:

(a) Rice milling and flour production from rice and farm produce.
(b) Fishery, specifically marine animal cultures.
 24

(3) Forestry from forestation.

(4) Production of plywood, veneer board, chipboard or hardboard.
(5) Production of lime.
(6) Accounting service business.
(7) Legal service business.
(8) Architecture service business.
(9) Engineering service business.
(10) Construction, except for:

(a) Construction rendering basic services to the public in public

utilities or transport requiring special tools, machinery, tech-
nology or construction expertise having the foreigners' mini-
mum capital of 500 million Baht or more.

(b) Other categories of construction as prescribed by the min-

isterial regulations.

(11) Broker or agent business, except:

(a) Being broken or agent for underwriting securities or ser-

vices connected with future trading of commodities or fi-
nancing instruments or securities.

(b) Being broker or agent for trading or procuring goods or

services necessary for production or rendering services
amongst affiliated enterprises.

(c) Being broker or agent for trading, purchasing or distribut-

ing or seeking both domestic and foreign markets for sell-
ing domestically manufactured or imported goods in the
manner of international business operations having the for-
eigners' minimum capital 100 million Baht or more.
 25

(d) Being broker or agent of other category as prescribed by

the ministerial regulations.

(12) Auction, except:

(a) Auction in the manner of international bidding not being the

auction of antiques, historical artifacts or art objects which are
Thai works of arts, handicraft or antiques or having the histori-
cal value.

(b) Other categories of auction as prescribed by the ministerial reg-

ulations.

(13)Internal trade connected with native products or produce not yet

prohibited by law.
(14)Retailing all categories of goods having the total minimum cap-
ital less than 100 million Baht or having the minimum capital of
each shop less than 20 million Baht.
(15)Wholesaling all categories of goods having minimum capital of
each shop less than 100 million Baht.
(16) Advertising business.
(17) Hotel business, except for hotel management service.
(18) Guided tour.
(19) Selling food or beverages.
(20) Plant cultivation and propagation business.
(21)Other categories of service business except that prescribed in
the Ministerial Regulations.
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Chapter 3
CONTRACT

1. A Contract or An Agreement

What is it ?

A juristic act arising from two or more parties declaring their

common intentions to give raise to rights and obligations which are
legally binding.

2. Formation of a Contract
2.1 There must be a declaration of intention of offer from one
party;

2.2 There must be a declaration of intention of acceptance from

the other party; and

2.3 The offer and the acceptance are completely correct and in
line with each other.

Note: Acceptance can be made implicitly. If according to the

declared intention of the party making the offer or no notice of
acceptance is normally required in the case, the contract is
effective upon the occurrence of the fact that is considered as a
declaration of intention of acceptance. For example, Peter said to
Bee “would you like to come into my room ?”, Bee just nodded and
walked into the room. Bee’s nodding and walking into the room can
 28

be considered as a declaration of intention of acceptance.

(Paragraph
2 of 361).

Note: When an offer is made to a person who is at another location,

the contract is formed when the acceptance from that person
reaches the person who made the offer. (Paragraph 1 of 361).

3. Types of Contract

3.1 Contract with remuneration (For example, a sale contract) or

without remuneration (For example, a loan of money contract).

3.2 Contract for the benefit of the other party (For example, A
agrees to give earnings to B) or Contract for the benefit of a
third party (For example, A buys car from B for C).

3.3 A principal contract and an accessory contract. The principal

contract is the main contract and is binding on its contractual
parties. An accessory contract is the secondary contract and is
subjected to the completeness of its principal contract. For
example, a loan of money contract (principal contract) and a
guarantee contract (accessory contract), the principal loan of
money contract provides for the lending of money to the
borrower and the accessory guarantee contract provides for the
guarantee of the repayment of money to the lender. If the
principal loan of money contract is not complete, the accessory
guarantee contract will be invalid.
 29

4. Deposit
4.1 Section 377 of the Civil and Commercial Code provides:

“If, on entering into a contract, something is given as earnest, this is

deemed to be proof of the conclusion of the contract. It also
serves as a security that the contract shall be performed”.

A deposit can be money or other things of value which one

contractual party delivers to the other contractual party when
entering into a contract. The deposit is the proof of the conclusion
of the contract and it is the security that the contract will be
performed.

Note: The deposit must be delivered, therefore immovable property

cannot be used as deposit since it cannot be delivered.

4.2 Unless agreed otherwise by the contractual parties, deposit is:

(a) To be returned* or treated as part-payment of money debt;

(b) To be forfeited, if the party giving it fails to perform, or if the

performance becomes impossible due to a circumstance for
which he or she is responsible.

(c) To be returned, if the party receiving it fails to perform, or, if the

performance becomes impossible due to a circumstance for
which he or she is responsible.

*A deposit is not a payment of debt in advance, therefore, when the

debt had been paid to the creditor, the deposit is returned.
 30

5. Penalty (379 - 383)

5.1 What is it ?

A penalty is damages or compensation for damage caused which the

contractual parties agreed in advance.

The debtor agreed that if the debtor does not perform his obligation
in the contract or does not perform it correctly, the penalty is
forfeited or the debtor is requested to make payment of the penalty.

5.2 A penalty must have the following important characteristics:

(a) Damages that are stipulated in advance.

(b) Penalty can be stipulated as a money amount or a performance

of obligation.

(c) If the penalty is to be stipulated as a money amount, the contrac-

tual parties have to agree to stipulate the penalty amount or the
way to calculate the penalty amount.

5.3 If the debtor has NOT paid the penalty to the creditor, and the
court considers that the penalty is disproportionately higher than
the actual damages caused, the court may order to reduce the
penalty to a reasonable amount.

In its consideration, the court shall take into consideration every

legitimate interest of the creditor, not merely property interest.
 31

If the penalty had been paid, the claim for its reduction cannot
be made.

6. Differences Between a Deposit and a Penalty

6.1 A deposit must be delivered to the other contractual party when

entering into the contract. However, a penalty amount can be
delivered or not be delivered to the other contractual party.

6.2 A deposit is something given to act as a security that the

contract shall be performed. A penalty amount is payable if the
debtor does not perform his, hers or its obligation in the contract
and damages has incurred. A deposit secures the performance
of the contract while a penalty compensates for the damages
that arise.

7. Termination of Contract (Paragraph 1 of 169 and 386)

7.1 Any contractual party who has the right to terminate a contract
can do so by declaring his intention to terminate to the other
party. However, if the declaration of intention to terminate is
issued to a party who is at another location, this declaration of
intention is only effective upon receipt by that party.

Note: The declaration of intention to terminate can be revoked

by the terminating party if the revocation reaches the other
party prior to or at the same time as the receipt of termination.

The declaration of intention to terminate is a juristic (legal) act

of one party only (i.e. the terminating party) to extinguish
contractual rights. Given this, an agreement or consent to
terminate is not required from the other party. In other words,
 32

the terminating party does not need to obtain the prior consent
of the other party to terminate the contract.

7.2 The right to terminate a contract arises from the following:

(a) Terminate the contract as according to a stipulation in the

contract. When the contract was entered into, the parties to the
contract agree and stipulate in the contract the right(s) for termi-
nating the contract.

(b) Terminate a contract as according to law. The law provides

the following:

(1) If one contractual party does not perform the obli-

gation, the other contractual party may fix a reason-
able period for the performance of the obligation to
take place and notify the contractual party to perform
within this period. If the contractual party does not per-
form within the period, the notifying contractual party
may terminate the contract.

For example, A and B entered into a sale contract

whereby A sells B his computer and B agrees to pay A
the purchase price for the computer five days later. No
payment was made after five days, A notifies B to
make payment within a reasonable period. B did not
make payment within this period, A can then terminate
the sale contract.

(2) According to the nature of the contract or the intentions

of the contractual parties, the objective of the contract is
to be accomplished by performance of the
 33

obligation at a fixed time or period, and this time or

period has passed without the contractual party having
performed. The other party may terminate the contract
without any prior notice. Having a prior notice here
seems pointless because the objective of the contract
cannot be accomplished.

For example, Kane agrees to write a computer

software program for Abel and deliver the software
program to Abel on April 25 because Abel needs to
sent the program to his client on April 25. However,
Kane delivered the software program to Abel on April
27. Abel can then terminate the contract without any
prior notice.

(3) If performance of the obligation according to the

contract becomes wholly or partly impossible due to
one party, the other contractual party may terminate
the contract.

For example, A agrees to sell her car to B and B agrees

to pay the purchase price when A delivers the car.
However, on the day before delivering the car, a fire
destroyed the car completely due to A’s negligence. B
can then terminate the contract.

Note: The above are the general conditions for termination of

contract. However, note that specific types of contract, for example,
a hire-purchase contract, may also have their own conditions for
contract termination.
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Review Questions
Question 1

Jeap agrees to sell Gip her motorcycle for 20,000 Baht next month,
when Jeap will move to Bangkok. Gip said to Jeap “you should put
your intentions in writing”. Jeap said angrily : “I am your friend Gip,
don’t you believe me ! ?” Gip said: “O.k, o.k I believe you now !”

The following month Gip go to Jeap’s house to buy the motorcycle,

but Jeap is not there and the house is now completely vacated.

(a) Have a contract been formed between Jeap and Gip ? If yes,
why? If no, why ?

(b) What can Gip do now ?

Question 2

Som (in Chonburi) offer to sell her cell phone to Lek (in Bangkok)
for 2,000 Baht. This offer was made to Lek by e-mail from Som.

After receiving the offer, Lek replied by e-mail stating that she
accepts the offer to buy the cell phone at 2,000 Baht. However, due
to some unknown reasons, this e-mail did NOT reach Som.

Is there a contract between Som and Lek ? Why ?

 35

Question 3

Tom placed a security deposit with Richey Company Limited when

he started working for the Company as its employee. In the
employment contract entered into between Tom and Richey
Company, it is provided that Richey Company shall return the
security deposit when Tom has completed working for the Company
for 6 months and has resigned from the Company after having
issued one month prior notice of resignation to the Company.

3 months after started working for the Company, the Company

stopped paying Tom his monthly salary. Tom got frustrated, he
resigned from the Company after 4 months of working and did not
give prior notice of resignation to the Company.

What should Richey Company do now ?