What should a Novation Agreement include under Thai law?

1. Definitions and Interpretation
2. Novation
3. Obligations Arising before the Effective Date
4. Status of the Original Contract
5. Deposits and Prepayments
6. Guarantees and Security
7. Consideration between the Transferor and the Transferee
8. Handover between the Transferor and the Transferee
9. Warranties
10. Costs and Stamp Duty
11. Notices
12. Governing Law and Disputes
13. General

• Replacing a party to a contract is, under Thai law, a novation by change of debtor: the old obligations end and new ones arise between the Transferee and the Continuing Party. It is not enough for the Transferor to "assign" the contract. Having all three parties sign this Agreement shows that each of them consented.
• Before signing, the Transferee should read the Original Contract and every amendment and side letter (Clause 4.2), and check the status statement in Clause 4.1 against the accounts.
• The Transferor stays responsible for everything that arose before the Effective Date and keeps the money earned before it (Clause 3.1). Agree with the Continuing Party how invoices for work that straddles the Effective Date will be split.- The Transferee takes over everything, including problems from before the Effective Date, and the Transferor is fully released (Clauses 3.1 and 3.2). The Transferee should price that risk into any payment under this Agreement.

Guarantees and security

• A guarantee or security that supported the Transferor's obligations does not automatically support the Transferee's. The novation takes effect only when the condition in Clause 6.1 is met.
• Arrange the Transferee's replacement security early, because the change of party waits for it. Once it is delivered, the Continuing Party must release the old security and return the original documents within 10 Business Days (Clause 6.2).- A guarantor or other person who gave security and is not a party to this Agreement must give their own written consent. This Agreement cannot consent on their behalf (Clause 6.2). A mortgage over land that is to secure the new obligations may also need a registration at the Land Office.
• If the condition is not met within 30 days, any party may terminate this Agreement and the Original Contract stays with the Transferor (Clause 6.3).

• If the Original Contract had to be registered or made in a special form (for example, a registered lease of land or buildings for more than 3 years), the change of party may need the same formality. Check this before the Effective Date.
• Tell the people who deal with the contract day to day, such as banks, insurers and delivery addresses, about the new party. Update any payment instructions in writing and signed, to reduce the risk of payment fraud.
• The Transferor should hand over records and credentials by the Effective Date (Clause 8.1) and delete personal data it no longer needs (Clause 8.2).

• A novation agreement as such is not listed in the Stamp Duty Schedule. If the Original Contract is a stamp-duty instrument, such as a lease, hire of work or loan, ask the Revenue Department whether the continuing contract with the Transferee needs duty. Clause 10.2 puts any duty on the Transferee.
• The payment of … between the Transferor and the Transferee may be taxable income for the recipient and may carry VAT or withholding tax. Ask an accountant how to invoice it.
• Keep the signed Agreement with the Original Contract. A Thai court will need a certified Thai translation of any English document you rely on.

Compiled from the notes that accompany the English contract templates on this site, published by Phuwara Krobtaku (ภูวรา ครอบตะคุ), Thai attorney-at-law, licence no. 477/2558. The short answer and summary at the top of this page are put together by the site from the template's clause headings and notes. Statutes are quoted only in the official Thai text: Thai is the only official language of Thai legislation, and an unofficial translation can mislead. Article registry OKC-BA1722. If you reuse this content, please credit the author and link to the original.