Defects and fitness for purpose – a Thai law perspective

In such scenarios, provided the parties are sophisticated commercial entities, the CCC’s provisions on contract interpretation, including the concept of “ordinary use”⁸, may come into force so that a common understanding of recognized industry-specific concepts by the parties is expected. It is our view that, with a strong evidentiary basis and persuasive arguments, the English law judgment of fitness for purpose and reasonable skill and care (and their relationship after MT Højgaard), although they are foreign legal concepts, should be applied in Thai construction projects that are based on standard form contracts. This is particularly so where clause 4.1 of the increasingly popular FIDIC 1999 set of contracts which refers to “fitness for purpose”, remains either unchanged or amended with clear and certain language.

What does all this mean for the contractor?

Given the lack of overall clarity on the status of fitness for purpose and reasonable duties of skill and care in the Thai legal context and the uncertainty surrounding the approach of the Thai courts, contractors should consider the following practical points:

(i) Rely on plain wording, not judicial interpretation, of the CCC’s standard provisions

Although not surprising, the need for contractors and employers to discuss in detail and clearly document their respective contractual obligations in relation to work standards is paramount. Assuming that tenders are based on a standard form, contractors need only agree amendments to the main document that add detail to the nature of the obligations as well as a clear indication of priority where reasonable skill/care and fitness for purpose provisions are present in the contract .

It should also be noted that the CCC does not offer a definition of “defects“. Therefore, parties choosing to adapt design obligations to a standard form should ensure that their drafting clearly reflects the parties’ intentions to avoid any adverse interpretation by Thai courts. These steps should go some way to overcoming the uncertain approach of the Thai courts, as it is expected that the common intention of the parties will be accepted when a dispute arises.

(ii) “Ordinary use” interpretation should be used as an auxiliary tool

While Sections 171 and 368 of the CCC on Interpretation appear to provide a convenient method of introducing common industry understanding of foreign legal concepts such as reasonable skill/care and fitness for purpose into a Thai construction/engineering project, contractors should view these provisions as a “spare copy” an additional tool, not a primary means of achieving security. Clear and certain contract drafting reflecting the parties’ precise intentions should always prevail, as Thai courts generally seek to give effect to such intentions in the event of a dispute.

(iii) Remember that some uncertainty is inevitable

Despite these proposed approaches to achieving greater clarity of contractual obligations, contractors must accept that some level of uncertainty is inevitable when dealing with the concepts of reasonable skill/care and fitness for purpose in a Thai construction project. On the one hand, as indicated above, the approach of the Supreme Court of Thailand in its limited relevant decisions is somewhat unpredictable. In addition, there may be difficulty in assessing the applicable statute of limitations in a dispute; this can vary dramatically from one year⁹ to ten years¹⁰ depending on whether the employer’s claim is for damages arising from defects under the CCC or instead as a breach of clearly worded provisions in the contract setting out the contractor’s obligations in terms of design, materials , workmanship and fitness for purpose. This illustrates the near impossibility of a contractor being prepared for every eventuality in the Thai construction context.

While contractors in Thailand should aim to enter into detailed contracts based on standard forms incorporating widely recognized industry concepts when it comes to the allocation of design responsibilities and the inclusion of reasonable skill and care and fitness for purpose provisions, they ultimately account should keep their wits about them.

UK intern Matt Buxton in Bangkok also contributed to this article.

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