Unofficial English Translation: Thailand Contract Committee Notice on Residential Building Construction Contracts (B.E. 2559 / 2016)

Quick summary (what this Notice does)

• Designates residential building construction as a contract-controlled business.
• Requires specific mandatory terms to appear in consumer residential construction contracts (Clause 3).
• Prohibits certain unfair clauses (Clause 4).
• Effective from 1 January 2017.

Notice of the Contract Committee

Re: Prescribing the Business of Residential Building Construction as a Contract-Controlled Business B.E. 2559 (2016)

By virtue of Section 35 bis of the Consumer Protection Act B.E. 2522 (1979), as amended by the Consumer Protection Act (No. 2) B.E. 2541 (1998), together with Sections 3, 4 and 5 of the Royal Decree Prescribing the Criteria and Procedures for Designating Contract-Controlled Businesses and the Characteristics of Contracts B.E. 2542 (1999), the Contract Committee hereby issues the following Notice:

Clause 1

The business of residential building construction is hereby prescribed as a contract-controlled business.

Clause 2 — Definitions

“Residential building construction business” means a business in which a business operator enters into a contract with a consumer for the construction of an entirely new building, where the consumer’s purpose is to use the building for residential living.

“Construction” means the construction of an entirely new building, whether or not it replaces an existing structure, and includes preparatory works or any other necessary stages of work which the business operator is required to perform under the construction contract in order to complete the building.

“Building” means a building, house, dwelling, or any other structure which a person may enter and reside in.

“For residential purposes” means the occupation or residence in all or part of a building, and does not include the use of all or part of the building for sale, lease, hire-purchase, or for provision to others in any manner whatsoever in return for money or other benefits.

Clause 3 — Mandatory Contract Requirements

A residential building construction contract entered into between a business operator and a consumer must: be written in the Thai language; be clearly visible and legible; use a font size not smaller than two (2) millimetres; and contain no more than eleven (11) characters per inch.

The contract must include the following material terms and conditions:

1. Details of: the place where the contract is made; the date of the contract; the purpose of use of the building; the design and type of the building; the construction site; and the name, address, and national identification number of the consumer and the business operator. Where the business operator is a juristic person, details as shown in the certificate of juristic person registration issued by the relevant government authority must also be specified.

2. Details of: the total construction price, inclusive of value added tax; and the obligation to procure materials and equipment in accordance with the type, size, and quality specified in the contract or in the annexed list of materials used for construction.

3. A bill of quantities showing the quantity of construction materials used and their prices.

4. Details of the construction stages and the corresponding payment instalments, which must be proportionate to the progress of the work in each stage.

5. A specified period within which the business operator must submit an application for a building construction permit to the relevant authority, calculated from the date of the contract.

6. A specified period for completion of the building construction, calculated from the date on which the building permit is granted by the competent official under the law.

7. Liability for Defects

   The business operator shall be liable for any damage arising from defects in the building, fence, or wall, as follows:

   • (a) In the case of structural parts of the building, including but not limited to piles, foundations, columns, beams, floors, roof structures, and load-bearing walls, for a period of not less than five (5) years from the date on which the consumer takes delivery of the building.
   • (b) In the case of integral components and essential equipment of the building other than those specified in (a), for a period of not less than one (1) year from the date on which the consumer takes delivery of the building.
   • (c) In the case of fences and walls, for a period of not less than one (1) year from the date on which the consumer takes delivery of the fence or wall.

   Where, during construction or after the consumer has taken delivery of the work, defects occur in the construction or the business operator fails to perform in accordance with the contract, and the consumer has given notice requiring the business operator to remedy the defects or comply with the contract within a reasonable period, but the business operator fails to do so, the consumer shall have the right to engage a third party to remedy the defects or continue the construction work. In such case, the business operator shall be liable for any resulting damage and any additional expenses incurred.

8. Right to Vary the Work

   The consumer shall have the right to amend, add to, or reduce the work from the design and specifications agreed under the contract without terminating the contract. The business operator and the consumer shall agree on a revised price in respect of such amendments, additions, or reductions.

   Where the business operator is responsible under the contract for submitting the application for a building permit, any amendment, addition, or reduction to the construction work which requires approval from the competent official under the law shall be notified by the business operator to the consumer in writing. Such notification shall specify that a permit application must be submitted within the prescribed period, calculated from the date on which the consumer and the business operator agree to the amendment, addition, or reduction of the work.

9. The business operator shall carry out the construction strictly in accordance with the design and specifications approved by the competent official under the law and shall meet standards not lower than those prescribed by law and professional practice.

10. Consumer Default and Termination Rights of the Business Operator

    In respect of any breach of contract by the consumer which entitles the business operator to terminate the contract or to refuse performance of any contractual obligation, the business operator must: specifically identify such breach; present the relevant clause in red text, bold type, or italics, clearly distinguished from ordinary text; and prior to termination, give written notice to the consumer. The notice must grant the consumer a rectification period of not less than thirty (30) days to remedy the breach.

11. Delay in Commencement or Completion

    Where the business operator fails to commence construction within the period specified in the contract or within a reasonable period, or delays construction without fault on the part of the consumer to the extent that it can reasonably be anticipated that the construction will not be completed within the contractual period:

    • (a) The consumer shall have the right to terminate the contract and shall be entitled to claim a refund of any payments already made by the consumer in respect of construction stages that have not yet been carried out by the business operator, including any other damages.
    • (b) Where the construction is delayed beyond the contractual completion period and the consumer does not exercise the right to terminate the contract, the business operator agrees that the consumer may impose a daily penalty as agreed in the contract, which shall not be less than 0.1 percent (0.1%) of the total construction contract price per day. If the consumer has exercised the right to claim penalties up to a total of ten percent (10%) of the total construction price, and the consumer considers that the business operator is no longer able to perform the contract, the consumer shall have the right to terminate the contract.

12. Force Majeure and Extension of Time

    Where any unavoidable force majeure event occurs, causing the construction work to be suspended without fault on the part of the business operator, or where circumstances arise for which the business operator is not responsible, the contractual completion period shall be extended by a period equal to the duration of such event.

    In such case, the business operator must notify the consumer in writing, together with supporting evidence, of the force majeure event and request an extension of the construction period within seven (7) days from the date on which such event has ceased.

    If the business operator fails to comply with the above requirement, the business operator shall be deemed to have waived any right to claim an extension of time for completion under the contract, without any conditions.

Clause 4 — Prohibited Contract Terms

Contracts between a business operator and a consumer must not contain clauses having the same or similar effect as any of the following:

1. Clauses that exempt or limit the business operator’s liability for breach of contract, defects, or wrongful acts (tort).

2. Clauses granting the business operator the right to terminate the contract with the consumer without written notice, or where the consumer has not breached a material contractual obligation.

3. Clauses granting the business operator the right to demand immediate payment of all or part of the debt before the contractual due date, where the consumer has not defaulted on payment or breached the contract.

4. Clauses granting the business operator the right to unilaterally amend construction details, prices, costs, or contractual conditions in a manner that imposes additional burdens on the consumer beyond those existing at the time of contract formation, without the consumer’s prior written consent.

5. Clauses stipulating that payments already made by the consumer are non-refundable in all circumstances.

6. Clauses requiring the consumer or the consumer’s representative to obtain the business operator’s consent before inspecting the construction work or entering the construction site.

7. Clauses granting the business operator the right to assign or transfer all or part of its contractual obligations to another person without obtaining the consumer’s consent.

8. Clauses providing that any building, construction works, materials, or equipment used in the construction—whether wholly or partly paid for or procured by the consumer—shall become the property of the business operator.

9. Clauses stipulating that if the consumer fails to inspect or accept the work within the period specified in the contract, the consumer shall be deemed to have accepted the work by implication.

Effective Date

This Notice shall enter into force as from 1 January B.E. 2560 (2017).

Issued on

Issued on 16 June B.E. 2559 (2016).

Samreang Mekkriengkrai
Chairman of the Contract Committee