Guarantee Contract in Thailand: Civil Code Rules

Where several parties owe the same obligation, joint and several liability in Thailand under Sections 290 to 296 sets what the creditor may demand from each debtor.

When a guaranteed claim is transferred, Section 305 passes the guarantee rights to the assignee; see our guide to assignment of claims in Thailand.

A guarantee can sit beside a pledge of movable assets. See our guide to a pledge in Thailand.

A guarantee is personal security; for security over a debtor’s property, read our guide to mortgage in Thailand.

Security for a debt can also take the form of pledged property instead of a personal promise; our guide to the Business Collateral Act in Thailand explains that route.

What is a guarantee contract in Thailand?

Section 680 defines a guarantee as a contract in which an outside person, the guarantor, commits to a creditor to perform the debtor’s obligation if the debtor fails to. Moreover, the guarantor must sign written evidence of the guarantee. Without that evidence, the creditor cannot enforce the guarantee in court.

However, Thai academic commentary reads the writing rule as a condition for suing, not as a form that voids the contract. In addition, the evidence can spread across several documents, such as letters, if together they show the intent to guarantee and carry the guarantor’s signature.

Which debts can a guarantee contract in Thailand cover?

Section 681 allows a guarantee to secure only a valid debt. A future or conditional debt can also be guaranteed, but the guarantee must then state the purpose of the debt, its nature, the maximum guaranteed amount and the period in which the debt may arise.

Because section 683 extends an unlimited guarantee to unpaid interest and damages, the guarantor’s exposure follows the terms of the underlying debt. For that reason, the guides on interest rate caps and penalty clauses describe how Thai law treats those sums.

Can a guarantor be a joint debtor?

Section 681/1 voids an agreement that makes a guarantor liable in the same way as a joint debtor. However, the exception is a juristic person that knowingly agrees to that liability. In that case, the guarantor does not have the protections in sections 688, 689 and 690.

Similarly, a 2015 briefing by a global law firm describes the same change. After Act No. 21, a juristic-person guarantor, including a financial institution, can be liable as a primary debtor if it agrees. In addition, a second global-firm article reads Act No. 20 as voiding contracts that impose joint liability on a debtor and a guarantor.

Furthermore, the sources place the list of protections that an agreement cannot vary in different sections. One legal database lists sections 681 (paragraphs 1 to 3), 686, 694, 698 and 699 under section 685/1. An academic article attributes a similar list to section 681/1. However, the sources agree that an agreement contrary to section 686 is void, so the Gazette text should settle the numbering.

What notice does section 686 require?

Section 686 requires the creditor to send the guarantor written notice within sixty days of the debtor’s default. Until the notice reaches the guarantor, the creditor cannot demand payment from the guarantor. If the creditor misses the sixty days, the guarantor is released from interest, damages and related charges that arise after that period.

Moreover, Thai commentary notes that the law prescribes no form for the notice. For example, a letter stating that the debt is overdue and asking for payment can qualify. However, the creditor must be able to prove that the guarantor received it within the period, for example by a postal receipt. A 2015 briefing on Act No. 21 adds that an agreement contrary to section 686 is void.

When is a guarantor released?

Section 698 releases the guarantor once the debtor’s obligation ends, whatever the reason. In addition, section 699 adds a separate right for one type of guarantee. A guarantor under a continuing guarantee with no time limit, given for the creditor’s benefit, can end it for future transactions by notifying the creditor.

Once the notice reaches the creditor, the guarantor is not liable for what the debtor does afterwards. Meanwhile, an academic article reads section 699 as giving no termination right under a fixed-term guarantee unless the contract provides one.

Guarantee contract in Thailand: which points do the sources leave open?

The sources agree on the core text of sections 680, 681, 686, 698 and 699. However, they differ on three points, which the Gazette text should settle. Each point appears below with what the sources report, so a reader can confirm it with the Office of the Council of State.

Guarantee contract in Thailand: questions and answers

Conclusion

A guarantee contract in Thailand binds the guarantor only within the written evidence, the named debt and the notice rules in the Code. Creditors therefore watch the sixty days in section 686, while guarantors read the named debt, the maximum amount and the period. For action against a debtor or guarantor, see our debt recovery lawyer page and the guide to commercial debt recovery.