A sales contract is a legally binding agreement between a buyer and a seller that outlines the terms and conditions of a property or asset sale. In Thailand, reviewing a sales contract before signing is crucial to ensure legal compliance and protect the interests of both parties.
Whether you are purchasing real estate, a business, or a vehicle, understanding the key elements of a sales contract, legal requirements, and potential risks can prevent disputes and financial losses. This guide provides an in-depth overview of sales contract review in Thailand and what buyers and sellers should consider.
1. What is a Sales Contract?
A sales contract (or “Sale and Purchase Agreement” – SPA) is a legal document that outlines:
✔ The terms of the sale (price, payment schedule, transfer conditions).
✔ The obligations of the buyer and seller.
✔ The legal rights of both parties.
✔ The penalties for breach of contract.
💡 Example: A foreign investor buys a condominium in Bangkok. The sales contract specifies the purchase price, deposit terms, and property transfer process.
2. Why is a Sales Contract Review Important?
✅ Prevents Fraud – Ensures the seller legally owns the asset.
✅ Clarifies Financial Obligations – Defines payment terms and responsibilities.
✅ Avoids Hidden Costs – Identifies additional fees (taxes, transfer fees, maintenance costs).
✅ Protects Buyer’s Rights – Ensures compliance with Thai contract law.
✅ Avoids Disputes – Clearly defines what happens if either party breaches the contract.
💡 Example: A buyer signs a sales contract for a villa in Phuket without legal review. Later, they discover the land title is invalid, leading to legal disputes and financial loss.
3. Key Elements of a Sales Contract in Thailand
3.1 Identification of the Parties
✔ Full legal names and addresses of both the buyer and seller.
✔ Passport numbers (for foreigners) or Thai ID numbers.
✔ Contact details for legal correspondence.
💡 Tip: Ensure the seller’s name matches the name on the title deed for property sales.
3.2 Description of the Property or Asset
✔ Exact details of the property or item being sold.
✔ For real estate: Land title number, size, location, and boundaries.
✔ For vehicles: Make, model, registration details.
💡 Tip: Compare the details in the contract with official government records to avoid misrepresentation.
3.3 Purchase Price and Payment Terms
✔ Total purchase price in Thai Baht (THB).
✔ Payment structure (deposit, installments, final payment).
✔ Due dates for each payment stage.
✔ Accepted payment methods (bank transfer, cashier’s check, etc.).
💡 Example: A seller demands cash payment, but the contract does not specify a legal payment method. This could lead to tax or fraud issues.
3.4 Deposit and Down Payment
✔ Initial deposit amount (usually 10-30% for real estate transactions).
✔ Whether the deposit is refundable or non-refundable.
✔ Conditions for deposit return (if sale is canceled).
💡 Tip: Ensure there is a clause specifying under what conditions the deposit is forfeited or refunded.
3.5 Property Transfer and Handover Date
✔ Exact date when ownership transfers to the buyer.
✔ Whether the seller must vacate the property before transfer.
✔ Required documents for transfer (title deed, tax receipts, ownership certificates).
💡 Example: A buyer purchases a condo but later finds out the seller has not paid common area fees, delaying the transfer.
3.6 Transfer Fees and Taxes
✔ Who pays the government transfer fees? (Buyer, seller, or shared).
✔ Breakdown of all taxes:
- Transfer fee (2% of property value).
- Stamp duty (0.5%) or specific business tax (3.3%).
- Withholding tax (calculated based on property ownership duration).
💡 Tip: Ensure the contract specifies who covers these costs, as failure to clarify may lead to unexpected expenses.
3.7 Warranties and Representations
✔ Seller confirms they have legal ownership of the property.
✔ The asset is free from mortgages, encumbrances, and legal disputes.
✔ The property meets zoning and building regulations.
💡 Example: A seller falsely claims a house is newly built, but a contract review reveals it is over 10 years old, affecting resale value.
3.8 Default and Breach of Contract
✔ Penalties if either party fails to complete the transaction.
✔ Legal consequences for late payment.
✔ What happens if the seller refuses to transfer ownership?
💡 Example: A buyer fails to make the final payment on time. The contract states the seller can cancel the sale and keep the deposit.
3.9 Dispute Resolution Clause
✔ Specifies whether disputes will be settled via Thai courts or arbitration.
✔ Defines which laws apply (Thai Civil and Commercial Code).
✔ Outlines the process for resolving disagreements.
💡 Tip: Foreign buyers should include a dispute resolution clause that allows for international arbitration if needed.
4. Common Issues in Sales Contracts
🔴 Hidden Fees and Extra Costs – Some contracts leave out government fees, maintenance fees, or property taxes.
🔴 Incomplete Ownership Rights – The seller may not have full ownership or may have a co-owner.
🔴 Unclear Refund Policies – If the sale is canceled, will the deposit be refunded?
🔴 Vague Payment Terms – Some sellers do not specify exact payment deadlines.
🔴 Foreign Ownership Restrictions – Foreigners must ensure the contract complies with Thai law.
💡 Example: A foreigner buys land through a Thai company without proper contract review. Later, they discover they do not have legal ownership.
5. Hiring a Lawyer for Contract Review
To avoid legal issues and financial losses, it is recommended to hire a Thai contract lawyer for a thorough review.
5.1 What a Lawyer Will Do
✔ Verify the authenticity of the title deed and seller’s ownership.
✔ Check for hidden fees or unfair clauses.
✔ Ensure compliance with Thai contract law.
✔ Negotiate contract terms in favor of the buyer.
💡 Tip: Never sign a sales contract without legal review, especially in high-value transactions like real estate purchases.
6. How to Amend a Sales Contract Before Signing?
If a contract has unclear terms, it should be revised before signing.
✅ Steps to Modify a Contract:
- Identify Problem Clauses – Highlight any vague or unfair terms.
- Negotiate Changes – Discuss revisions with the seller.
- Have the Lawyer Draft a Revised Version – Ensure it is legally sound.
- Review Again Before Signing – Never rush the signing process.
💡 Example: A buyer requests to extend the payment deadline by 30 days due to bank delays. The seller agrees, and the contract is amended.
7. Conclusion
Reviewing a sales contract in Thailand is a critical step to ensuring a safe, legal, and fair transaction. Whether buying property Thailand, a business, or other assets, a well-structured contract protects both buyers and sellers from legal disputes and financial risks.
✔ Key Takeaways:
- Always verify ownership details and legal compliance.
- Clearly define payment terms, transfer costs, and tax responsibilities.
- Be aware of hidden fees and foreign ownership restrictions.
- Seek legal assistance before signing any contract.
