How often do we find ourselves needing to enter into a contract on the terms set by a seller, supplier, landlord, or employer? From minor purchases like buying chewing gum in a store to long-term leases of commercial and industrial complexes, we must either accept the proposed terms or negotiate to reach mutually beneficial conditions.
In any legal system, a contract is concluded by the voluntary agreement of the parties, who are free to choose their counterparties and define the contract terms. According to Article 149 of the Civil and Commercial Code of the Kingdom of Thailand, a legal act is defined as a lawful and voluntary action aimed at establishing legal relations between parties, resulting in the creation, modification, transfer, protection, or termination of rights.
So why do so many transactions take place on terms that are clearly unfavorable or unfair to one party?
First, there is the “lack of alternatives.” You want to open a restaurant in a perfect, high-traffic location, and the price seems acceptable. However, the landlord refuses to negotiate other terms: either you sign the contract as is, or the deal is off. After a few unsuccessful attempts at negotiation—perceived by the landlord almost as an insult—you agree. In doing so, you assume obligations such as paying excessive penalties for late rent and vacating the premises within a month of notice without compensation for renovations.
Second, signing an unfavorable contract may result from the incompetence of the lawyer drafting or reviewing the document. A lawyer should understand your requirements—and ideally those of the other party—before starting work. There are always nuances in contracts that may seem insignificant but are actually critical and can be overlooked.
The most common reason for compromised rights is simple inattention. Contracts with all their details and appendices can be lengthy, and not everyone has the patience to read them thoroughly. The consequences of incomplete review can be severe.
Many foreigners are unaware of the Thai “Unfair Contract Terms Act” of 1997, which in certain cases can serve as protection against dishonest sellers, landlords, or service providers.
The law was enacted to protect the party in a weaker bargaining position due to differences in social status, financial capacity, lack of choice, or other factors. Thus, contract terms between a consumer (buyer, tenant, employee, etc.) and a business operator (seller, landlord, service provider, etc.) that grant unjustified advantages to the latter are considered unfair. In such cases, the contract remains enforceable only to the extent that its terms are fair and reasonable under the circumstances.
Contract terms may be deemed unfair if they impose greater burdens on one party while granting advantages to the other. For example:
- Imposing greater liability than provided by law or excluding/limiting the other party’s liability in case of breach
- Granting one party the right to terminate the contract unilaterally without valid grounds
- Allowing one party to fail to perform obligations or perform them late
- Granting one party the right to demand obligations not предусмотренные договором
When determining fairness, it is important to consider the circumstances of the contract’s conclusion: good faith of the parties, their bargaining positions, level of understanding, availability of alternatives, and other advantages or disadvantages.
It should be remembered that only a court can declare a contract term unfair and unenforceable. Therefore, it is essential to weigh all the pros and cons before signing a contract to avoid disputes, unexpected expenses, and lengthy legal proceedings.
Author: Alexandra Agapitova.
All rights reserved.
Copying and use of materials without written permission is prohibited.