Legal contract management of construction projects
Endless opportunities for the construction sector of Thailand
Asia continues to be the world’s fastest-growing region, and the region is forecast to grow at a yearly rate of around 7 percent. Thailand praises itself as the Asian investment hub and the building and construction sector has a great impact on its future growth with Thailand having a yearly output of roughly 50 million tons of cement. Although the Thai government currently initiates mega infrastructure projects, there is obviously a need and great opportunity for private investors for new construction projects, not driven by state-funded ventures.
Thailand’s construction markets growth prospects differ by sector, project type, and type of construction activity. The share of construction spending in Thailand can be roughly summarized as 50% infrastructure (and other, mainly public projects), 30% residential and 20% non-residential. While the residential sector is deemed to be the fastest-growing segment, the infrastructure sector will certainly be more profitable in the next years.
Foreigner restrictions: Generally, the construction business is reserved for Thai businesses that require majority of Thai shareholding. Certain mega infrastructure projects for public utilities and transport are exempted under the Foreign Business Act and can be accomplished by a Thai construction company with 100% foreign shareholders if a THB 500 million limitation is exceeded. The same exemption is granted for certain construction business stipulated in a ministerial regulation.
The construction of residential buildings for consumers is since 2017 a “contract-controlled business”. Residential construction contracts must contain certain conditions. The regulation also contains a list of clauses which are not allowed to be included in the building contract pic.twitter.com/oyeGimv3ND
— Bangkok Lawyer (@bangkoklawyer) February 4, 2020
Building restrictions: The construction has to take into consideration various laws, frequently amended and accompanied by ministerial regulations. The Town and City Planning Act, the Building Control Act, and the National Environmental Quality Act covers environmental and land-use restrictions. Additional location-specific regulations apply. These restrictions have to be implemented in the specific construction contract.
Poor standards: Construction work is insufficiently governed by Thailand’s hire of work clauses in the Civil & Commercial Code. Without a detailed construction contract, controversies are inevitable. In Thailand, even big construction projects typically base on merely cursorily documentation and insufficient definitions of the terms and conditions, timelines and responsibilities of the parties involved. Competitions and tender procedures are poorly prepared, arranged and managed. Lack of knowledge and ignorance of construction laws and industry practice go hand in hand with a willingness to look for silly shortcuts and an unlawful circumvention of the laws and regulations. This all results in a situation where the investor is not armed and prepared to fight against delays, cost increases and a poor quality of design and construction practices.
Contract management of construction projects should cover the following aspects:: Contract adjustment, the coordination and calibration of the bundle of contractual agreements with separate partners regarding (i) performance profiles and scope of work, timeline and deadlines, (ii) liability and warranty clauses, avoidance of double payment terms and (iii) exit and rescission clauses. Change order management: Qualities, deadlines, costs by (i) pro-active and preventive contract design to avoid the necessity of change orders and (ii) a continuous adjustment of ongoing contracts to implement and define change orders. Claim management: Defaults and delays, unilateral performance determination or third-party fault by (i) contractual claim avoidance and reduction strategies and (ii) documentation, preservation of evidence.
Professional services from Bangkok for construction projects in Thailand
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. The law firm makes the difference as an experienced international lawyer to incorporate, integrate and monitor Western standards in Thai construction contracts, procedures, and process engineering.
Construction laws: PUGNATORIUS Ltd. provides support and assistance regarding legal aspects of tender documents for architectural and construction contracts. It offers legal assistance regarding private and public building and construction law and architects’ law of Thailand. This starts with the construction-related legal advice in the pre-construction phase and the course of the construction project.
Contract management: The law firm is experienced in the design, preparation and negotiation of Thai construction contracts and supportive documents including change order management. It accomplishes claim and anti-claim management, the enforcement and defense of performance, warranty, deficiency remediation, liability, and payment claims. PUGNATORIUS Ltd. uses high stands for the preservation of evidence, pre-trial discovery, negotiation, and litigation or arbitration in construction, architectural and legal distribution disputes.
Professional services: Assignments on real estate investments are one of the core business activities with a particular competence, long-standing experience, and unique market reputation of the law firm. Details can be found at “Legal services and tax planning for real estate acquisitions and property developments“.