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CONTRACTS

BUSINESS AGREEMENTS AND DUE DILIGENCE PROCESS:

Corporate due diligence investigation

Before entering into a business relationship with a Thai company, it is highly recommended to conduct a preliminary research on the company in question. At Smart Legal Solutions we provide clear corporate reports in English within 5 business days to verify if the company in question is a legitimate company that can comply with the terms of the agreement. Our reports include the following corporate information about the company in question:

Current status of the company to ensure that the company is registered with the Thai Ministry of Commerce and operational.
Date of company registration and current company address.
Commercial objectives of the company to confirm that the company has legal capacity to carry out the requested commercial activity.
Name of the current directors of the company with authorized binding signature. It should be noted that if the contract is signed by a person other than the one listed in the Ministry of Commerce, the company will not be responsible of breaching the contract in the event of a legal dispute.
Information on the company's registered capital and the balance of assets and losses for the previous year. We will confirm that the company has sufficient assets to meet the payments as per the contract.

Commercial Agreement

After verifying that the Thai company in question is a legitimate company capable of fulfilling the terms of the commercial agreement, it is important to formalize the terms of the business relationship through a written contract and ensuring that such terms are valid and enforceable under Thai law.

The general contract principles of Thailand are detailed in the Civil and Commercial Code of Thailand. Although Thailand is generally a ‘freedom of contract’ civil law jurisdiction, certain agreement’s provisions might be not permissible or enforceable according with the Thai Unfair Contract Terms Act and other local regulations.

In this regard, our expert team of lawyers will assist in the drafting an enforceable agreement to protect your interest on a specific commercial project. Our firm has extensive experience in the drafting and enforcing several types of contracts in Thailand such as manufacturing agreements; supply and import agreements; construction contract; service provision contracts etc.

Employment Agreement

The Thai Labour Protection Act governs the employment relationships between employee and employers in Thailand. An employment agreement creates a professional relationship between an employer and his employee. It is strongly advised that employers and employees have a written agreement to clearly specify the terms and conditions of employment. In consequence, if any dispute arises, the parties can refer to the agreement to determine the agreed provisions.

Under the principle of Freedom of Contract, employees and employers can stipulate on the agreement their own terms to exchange services for remuneration as long as the activity is not contrary to the public order or morals.

In Thailand, employment contracts can be broadly categorized into two main types: fixed-term and open-ended. However, Thai labor law generally protects all types of employment arrangements against abuses by employers.

The employer is required to meet the minimum requirements as required by the Labor Protection Act and ministerial regulations. For most employees, the working day should not exceed eight hours or forty-eight hours a week without overtime compensation.

The minimum wage in Thailand is 300 baht per day and wages need to be paid at least once a month. Employees are entitled to 13 holidays per year and after one year of employment, they receive a minimum of 6 days of paid personal leave. Employees are granted a minimum of 30 days of paid sick leave and an explanation or medical certificate is only required if the employee is absent for more than three or more days.

Franchise

Agreement

A Franchise business in Thailand is regulated by the Thai Trade Competition Act. The Trade Competition Commission is the government body in charge of the supervision and enforcement of the Trade Competition Law. A Franchise Agreement is a legal contract between a franchisor and franchisee, whereby the franchisor is grants a license to the franchisee to use his mark, operational model and required support to run a similar business in exchange for a fee or based of the incomes generated.

The general legal principle of freedom of contract is applicable in Thailand for Franchise agreements. Therefore, both parties parties are free to bind themselves to any condition in the contract as long as the contract is not otherwise prohibited by law. With regard to franchising, there is currently no specific regulation which restricts parties’ rights in this regard.

First of all, before entering into a franchise agreement, the franchisor and franchisee should conduct due diligence , such as reviewing the registered rights of the partner, any litigations in which the partner has been involved, any issues which could be raised when the product enters the market, etc.

Moreover, Thai trademark law requires that a trademark licence agreement (which a franchise agreement would be considered if a trademark usage right is granted to the franchisee) must be made in writing and registered at the Thai Department of Intellectual Property.

Contract enforcement

Foreign persons or companies may enter into contracts and establish contractual relationships with Thai nationals. The place where the obligations of the contract are to be discharged may be the country of residence of any such foreigner, and the employees of the parties carrying out the obligations may be mainly non-Thais who do not reside in Thailand.

In order for an agreement to be clearly binding and enforceable, it is necessary to ensure that it is signed by the correct combination of duly authorized representatives, with the company’s seal where required.

Written contracts will generally be enforced in Thai courts using similar principles to those that exist in western countries. The Thai Courts of Justice are classified into three levels consisting of Courts of First Instance, Courts of Appeal and the Supreme Court.

Foreign investors that enter into Thailand-related investment transactions should consider using Thai courts as their venue for resolving disputes. Foreign judgments are not enforceable in the Kingdom, so a plaintiff would have to initiate a new lawsuit in Thailand to pursue a defendant’s Thai assets or otherwise enforce a contract.

However, foreign arbitral awards are enforceable in Thailand, as Thailand is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Arbitration is considered to offer the primary advantage of neutral, independent dispute resolution outside the courts. Assuming both parties agree or there is a specific provision in the contract to the effect that any dispute must be referred to arbitration.