THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
7. Construction 7.1 Common Structures Used to Price Construction Projects The following are the most common structures used to price construction projects. • Fixed price contract – a lump sum is paid for the completion of the work. The business risk lies with the contractor. • Cost plus contract – payment of actual expenses and costs on a reimbursable basis, plus percent - age or fixed fee. The employer bears the risk. 7.2 Assigning Responsibility for the Design and Construction of a Project The liability for the design and build depends on the contractual arrangements of the parties. If the con - tractor in a design-build contractual relationship assumes the responsibility for the whole project, such contractor will be the sole responsible party. However, if the owner employs different entities in a design- tender approach, the design and construction will be performed by different parties. In that case, the responsibility of the parties is divided according to their respective contractual performance. 7.3 Management of Construction Risk Indemnification is commonly used in construction contracts. Parties also usually agree to limit their lia - bility to a fixed amount or in the form of a waiver of consequential damages. Thai law implements consumer protection provisions in relation to agreements for the construction of resi - dential houses. Such contracts cannot include any exclusion or limitation of liability for breach of con - tract by the contractor. Furthermore, warranty periods are specified and are not freely negotiable: liability for defects, such as five years for structure and one year for component parts and equipment, must be includ - ed in a consumer-related construction agreement. 7.4 Management of Schedule-Related Risk Parties typically manage schedule-related risks by implementing milestone payments. Such payments are connected to penalty payments in the case of a delay, but also include incentives for early completion.
Under the Expropriation and Acquisition of Immovable Property Act (2019), subject to certain requirements, government entities can expropriate immovable prop - erty for the purposes of public utilities, military, natu - ral resources or for any other benefits of the public including town planning, environmental preservation, agricultural development, land reform, historical sites preservation, special economic zones development and industrial purposes. The Act provides the gov - ernment entities with the absolute and unilateral right to exercise this power, and the expropriated property owners must comply with any expropriation order. Any existing lease agreement over the expropriated prop - erty will be terminated due to the expropriation. How - ever, both the landlord and the tenant will be entitled to receive compensation from the government entities as provided by the Act. The length of the proceedings varies from case to case. 6.23 Remedies/Damages for Breach For a landlord not in breach of contract, the rem - edies that a landlord may pursue include seeking compensation and pursuing specific performance of the agreement. Additionally, injunctive relief may be sought to prevent actions that obstruct contractual duties or exacerbate harm to the non-breaching party, or to enforce compliance with contractual obligations. Damages claims are generally confined to those resulting from the non-performance. However, the non-breaching party may demand damages stem - ming from special circumstances if they were fore - seeable. Court intervention may adjust contractual damages if deemed excessive. A security deposit is usually held to protect the land - lord should the tenant fail to meet its obligations. In addition, the landlord might require the tenant to pro - vide a guarantor for the performance of the tenant’s obligations. Under certain conditions, the security deposit cannot legally exceed one-month’s rent. The form of the deposit is negotiable between the parties.
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