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Thailand Law Update

Update New law on Suretyship in Thailand
Author : M & S Law Office 2006
Issued : 06-March-2015

On 13 November 2014 Thailand has amended the law concerning Guarantee which has been effective as of 14 February 2015. The new law prohibits any agreement that imposes liability of the guarantee as a joint debtor or as a debtor to an agreement, making such agreement void.

From such amendment, the guarantee may argue that the primary debtor is able to pay off the debt and, therefore, the primary debtor should pay off the debt. Therefore, the creditor is required to first enforce payment of the debt against the debtor’s assets and if the proceeds from the assets are not sufficient for the payment, the guarantee will be the last resort for payment of the debt.

However, there is an exception if the debtor is bankrupt or the debtor’s whereabouts cannot be located, the guarantee cannot raise such argument.

Note that the amendment shall not affect the agreements that were made before the new law.

Relevant Law

Thai Civil Commercial Code

Section 681/1. An agreement which binds the guarantor to be jointly liable with the debtor or as joint debtors is void.”

Section 688. When the creditor demands performance of the obligation from the surety, the latter may require that the debtor be first called upon to perform unless the debtor has been adjudged bankrupt, or his whereabouts in Thailand in unknown.

Section 689. Even after the debtor has been called upon as provided in the forgoing section, if the surety can prove that the debtor has the means to perform and that execution would not be difficult, the creditor must first make execution against the property of the debtor.

 

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