The Roles of “Good Faith” and “Good Commercial Practice” in Interpreting a Contract in Thailand

Abstract

Two main rules of interpretation, sections 171 and 368 of the Thai Civil and Commercial Code were copied from English translations of §§ 133 and 157 of the  German Civil Code 1900, respectively. In Thailand, good faith has universal applicability in identifying and interpreting contracts. It assists the courts in implying a contractual duty into a contract and is the main tool used to interpret a contract. Despite being products of two conflicting theories, namely intention and expression theories, sections 171 and 368 CCC are often cited collectively when a contract is interpreted. Thai courts have combined these two provisions to establish common guidelines for interpretation to the effect that in interpreting a contract, the common intention of the parties must be ascertained in accordance with the dictates of good faith in relation to good commercial practice. Thai courts neither define nor distinguish between these two concepts. Their collective citation has become a pattern in the application of sections 171 and 368 CCC. Although we have yet to obtain clear criteria for invoking good faith and good commercial practice by the courts, it is clear that we cannot rely on the literal meaning of the words used in the contract to interpret contractual terms. Thai courts can revoke a term even if is written in the clearest possible manner. This may improve the debtor’s chance of relief from a contractual obligation.