THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
7.5 Additional Forms of Security to Guarantee a Contractor’s Performance One or more of the following securities is typi - cally provided: • a bank guarantee by the contractor for advance payment received from the owner; • a performance bond by the contractor to secure the owner against the contractor’s fail - ings in performance of the contract; • a warranty bond provided by the contractor during the warranty period; and/or • retention of part of the payment of each required instalment by the owner until expiry of the warranty period. 7.6 Liens or Encumbrances in the Event of Non-Payment By law, a contractor obtains a preferential right on the immovable property for work done on such immovable property. Such preferential right allows the creditor to receive performance of the obligation out of such immovable property in preference to other creditors. Since the prefer - ential right is an ancillary right to the obligation, it will be extinguished by the performance of the obligation. 7.7 Requirements Before Use or Inhabitation Use-Controlled Buildings Certain “use-controlled buildings” are required to receive “use certification” after completion of construction. Such buildings are: • hotels, condominiums, warehouses, hospi - tals, hazardous goods storage rooms, dor - mitories or common residential buildings (eg, apartment blocks) which are classified as “large building” under the law; • convention halls or office buildings having a total floor area of 300 square metres or more;
ity of the parties is divided according to their respective contractual performance. 7.3 Management of Construction Risk Indemnification is commonly used in construc - tion contracts. Parties also usually agree to limit their liability to a fixed amount or in the form of a waiver of consequential damages. Thai law implements consumer protection provi - sions in relation to agreements for the construc - tion of residential houses. Such contracts can - not include any exclusion or limitation of liability for breach of contract by the contractor. Further - more, 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 included in a con - sumer-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. Furthermore, early termina - tion clauses are commonly agreed. Thai law provides for automatic penalty provi - sions (ie, regardless of whether these are includ - ed in the contract between the parties) in cer - tain commercial projects such as condominium buildings and consumer-related construction agreements. In both cases, any delay in com - pleting the project is subject to a daily penalty of 0.01% of the total contractual amount, limited to 10% of the contractual amount.
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