Agency Law in International Commerce in Thailand

An important consideration when conducting an international commerce business in Thailand is the issue of agency relationships between a distributor and the overseas supplier or manufacturer. Where an agency agreement has been created, the general rule of law is that principals are held liable to third parties, such as purchasers, for the authorized actions of their agents. However, particular attention should be paid to Section 824 of the Civil and Commercial which states that an “agent who makes a contract on behalf of a principal who is, and has his domicile, in a foreign country is personally liable on the contract although the name of the principal has been disclosed…”

In Thai Supreme Court Decision No. 4939/2549, the facts were that during March 1997, Buyer, a company in Thailand, purchased a backup electricity generator in the amount of 54,200 pounds sterling from Distributor, also a company in Thailand, who was acting as agent on behalf of Supplier, a company in Singapore. Buyer’s bank issued a letter of credit and payment was made directly to Supplier. Due to a clerical error, Buyer paid for the generator twice and later asked for assistance from Distributor in seeking a refund of the overpaid amount from Supplier. However, during July 1997, Buyer agreed to purchase two more generators from Distributor who still acted as agent of Supplier and that the excess amount paid to Supplier would be deducted from the total. The following year, during October 1998, Buyer only received one generator from Distributor and Supplier. After failing to receive the second generator, Buyer filed a lawsuit against both parties for the amount of 2,239,140 baht plus interest of 7.5% per annum. At trial, Distributor defended on the grounds that they were not acting as agent of Supplier because Distributor had no authority to receive payment from Buyer nor had the authority to return the excess amount originally paid by Buyer. At trial:

• A witness for Buyer testified that Distributor presented an offer to sell backup electricity generators to Buyer. Negotiations as to price of the generators were conducted between Buyer and Distributor. Distributor confirmed the final price and after Buyer agreed to purchase the generators, Distributor offered documents and certificates concerning the generators to Buyer and issued payment details to Buyer on behalf of the Supplier.
• The Court held that the evidence appears to prove that Distributor entered into a purchase and sales agreement with Buyer on behalf of Supplier, a foreign company domiciled in a foreign country. Therefore, due to the failure of Buyer to receive the items purchased according to the agreement, Distributor may be held solely and personally liable to Buyer according to Section 824 of the Civil and Commercial Code.

International commercial law is complex. International traders in Thailand are advised to consult with competent legal counsel when engaging in business.

 

Category: Civil and Commercial Law, Company Law