Key takeaways
- Most sale and purchase disputes turn on one early question: is this a completed sale, or only an agreement to sell? Get it wrong and the claim can fail before the merits.
- A deposit and a penalty clause are not the same thing. A court can reduce a penalty that is too high, but not once it has been paid.
- Form matters: a sale of land is void unless registered, and larger goods sales are unenforceable without written evidence, an earnest, or part performance.
- Watch the clock: most contract claims run for ten years, but a trader's claim for the price of goods runs for only two.
Completed sale, or agreement to sell?
In a completed sale of a specific thing, ownership passes the moment the contract is made, so the dispute is usually about price or warranty. In an agreement to sell, title has not passed, and the remedy is to compel the sale or to rescind and claim damages. These are different claims with different remedies, and pleading the wrong one can sink an otherwise good case. Characterising the contract correctly on day one is the single most important step.
Form can decide enforceability
Thai law makes some contracts unenforceable, or void, for want of form. A sale of immovable property is void unless it is in writing and registered. An agreement to sell such property, or any sale of goods priced at 500 baht or more, is unenforceable by court action unless there is signed written evidence, an earnest, or part performance. A handshake deal on a significant sale is not just risky, it may be unprovable in court.
Deposit or penalty: a distinction worth money
Two money clauses are routinely confused, and the difference is real. An earnest or deposit (มัดจำ) is forfeited if the party who gave it defaults, and returned if the party who received it defaults. A penalty or liquidated-damages clause (เบี้ยปรับ) works differently, and importantly a Thai court has the power to reduce a penalty that is disproportionately high. That judicial power to cut a penalty is lost, however, once the penalty has actually been paid, which is why how and when a party pays or claims can matter as much as the clause itself.
From our practice Sale and purchase disputes are often won in the first week, on paper, not in final submissions. Characterising the contract correctly, distinguishing a deposit from a penalty, and preserving evidence of the actual loss suffered are the steps that decide whether a claim holds up, because a penalty with no proof of loss can be cut by the court.
What our clients say "Dej-Udom & Associates' Litigation team consistently demonstrates a solid, strategic understanding of civil litigation and real insight into matters relating to Sale and Purchase Agreements." — Mr. Kittipat Kadsard, Sales Manager. (shared with the client's consent)
What to do now
Characterise the contract correctly from the outset, and plead the remedy that matches it. Distinguish a deposit from a penalty deliberately in both the contract and the claim. Keep evidence of the actual loss suffered, because a penalty can be reduced without it. And watch the prescription period: contract claims generally run for ten years, but a trader's claim for the price of goods delivered runs for only two.
How Dej-Udom & Associates can help
Our Litigation and Dispute Resolution team advises and represents clients in sale and purchase and commercial contract disputes: specific performance, rescission and damages, deposit and penalty claims, and debt recovery, from the first demand letter through to judgment and enforcement.
Legal references: Civil and Commercial Code, Sections 453, 456, 458, 377 to 383, 213, 215, 222, 386 to 391, 193/30 and 193/34.
Disclaimer: This publication is intended for general informational purposes only and does not constitute legal advice. The information contained herein should not be relied upon as a substitute for specific legal counsel. For advice tailored to your circumstances, please contact Dej-Udom & Associates directly.