Construction Contracts in Thailand: 7 Clauses to Read First

Clause One: The Scope of Work and the Documents Attached to It

Almost every construction contract that turns into a dispute later starts to go wrong in the same place: a scope of work written far too loosely. A sentence such as “build a two-storey house according to the agreed drawings” sounds perfectly clear until you are standing on site arguing about which drawings were the agreed ones. The fix is to name the drawing numbers, their dates and the total sheet count in the contract itself.

Every drawing sheet and the BOQ (bill of quantities, the priced schedule of works and materials) must be stated to form part of the contract, not merely to have accompanied the quotation. Once they are contract documents, whatever appears in the drawings and in the BOQ is what the contractor is obliged to build, and the homeowner has something concrete to point at during inspections.

A good BOQ names the brand or the quality grade of the main materials: roof tiles, sanitary ware, electrical cable, water pipe and paint. A line that reads only “standard material or equivalent” leaves the door permanently open to the cheapest option on the market, and leaves the homeowner with nothing to argue from.

Clause Two: The Lump-Sum Price and What It Leaves Out

The price clause should state plainly that this is a lump sum covering both materials and labour, whether or not value added tax is included, and which works it covers. Just as important, and deserving equally clear wording, is the list of what it does not cover.

The items most often excluded, and most often turning into extra cost later, are earth fill and site levelling, fencing and gates, changes to pile length after the soil test, electricity and water meter connection fees, the building permit application, built-in furniture and landscaping. If none of this is raised at the start, the number you agreed on will not be the number you end up paying.

Material price volatility deserves an advance agreement too. Some contracts hold the price fixed for the whole build; others allow steel or concrete to be repriced once the movement exceeds a stated percentage. Either approach is acceptable, but the contract must say clearly which index or whose quotation the adjustment is calculated from.

Clause Three: Payment Milestones and Retention Money

Payments should be tied to visible progress on site, not to the calendar: paid when the first-floor structure is complete, paid when the roof is on, rather than paid at the end of each month. Calendar payments allow the money to run ahead of the work without anyone particularly noticing.

A first payment on signature of roughly 10 to 15 per cent of the construction cost is common. If a contractor asks for substantially more than that, ask why, and ask for the excess to be itemised as specific material costs backed by purchase orders. These figures vary with the size of the project and the terms each company works to.

The other element you need is retention money, roughly 5 to 10 per cent, either deducted from each payment or held back from the final one, and released when the warranty period ends or when the outstanding defects have all been put right. That retained sum is the only leverage you still hold once the house is finished. Without it, getting a contractor to come back and fix something becomes very hard indeed.

Clause Four: The Construction Period and Late Completion Penalties

The contract has to state the start date, the number of days allowed for construction and the completion date, and it has to say whether those are calendar days or working days. A typical two-storey house runs somewhere in the region of 8 to 12 months depending on size and the level of finishing. That figure should come from a real programme, not from a round number mentioned during the quotation.

Late completion penalties are what give the deadline any weight. Rates seen in residential contracts fall roughly in the range of 0.01 to 0.1 per cent of the contract value per day, usually with an overall cap, often not exceeding 10 per cent. The actual rate is whatever the two parties negotiate.

The clause should also list the circumstances in which time can be extended without a penalty: continuous rainfall beyond a stated number of days, additional work instructed by the owner, or late payment by the owner. The Isan rainy season, which can deliver heavy rain several days running, is worth spelling out explicitly so that nobody is arguing about fault after the event.

Clauses Five and Six: Variations in Writing, and the Warranty

Changes during construction are inevitable: moving a socket, adding a wall, switching a tile. All of it is entirely normal, but the contract needs to set out the procedure. The contractor prices the change and states its effect on the programme in writing, the owner signs the approval, and only then does the work go ahead.

Instructing extra work by phone, or verbally on site, is the single most frequent source of payment disputes, because by the time the final invoice arrives the two sides remember different prices and disagree over whether the item was inside the lump sum all along. A one-page variation order signed by both parties eliminates the problem entirely.

The warranty clause should set separate periods for different categories of work: around 5 years for structural work, around 1 year for general and finishing work, and typically 1 to 2 years for roof leaks and building services. It should also state how a claim is notified and how quickly the contractor must attend. A clause that says nothing more than “one year warranty on workmanship” is far too thin to be of any real use.

Clause Seven: Termination, Who Signs, and Stamp Duty

A sound contract can explain how it ends if the relationship breaks down: work suspended for more than a stated number of consecutive days, substandard work the contractor refuses to correct, or payments from the owner overdue beyond the agreed limit. Termination needs a clear settlement mechanism, and the contract should also say that disputes begin with negotiation and then go to the court of the province where the house is being built, which for a project in Korat or Roi Et is far more convenient than Bangkok.

People routinely overlook the question of who the parties actually are. If you are engaging a company, the signatory must be a director with authority under the company affidavit, with the company seal applied where the articles require it, and you should keep a copy of an affidavit issued within the last six months. If you are engaging an individual contractor, attach a copy of their ID card and record an address at which they can genuinely be reached. Since foreign nationals generally cannot own land in Thailand, the party signing as employer is often a Thai spouse or a Thai company, and it should be whoever actually holds the title and will be making the payments.

A construction contract is treated under Thai law as a hire-of-work contract, which means it attracts stamp duty under the schedule in force in 2026 at the rate of 1 baht per 1,000 baht of the contract price, and the stamps should be properly cancelled on the day of signing. A home builder such as OBILIS will take care of this as a matter of course, but if you are contracting directly with a builder it is worth checking that it has been done.

To get a rough budget before you talk to anyone, try our house price calculator, or contact the OBILIS team to talk through your plot.

Related reading: Construction Payment Schedules in Thailand: A Safe Split

Frequently Asked Questions

The contractor wants to use his own contract. Should I agree?

You can, but read every clause to the end and ask for anything unfair to be amended before you sign. A contractor’s standard form usually sets out the payment terms in considerable detail while dealing with penalties, warranty and termination in a line or two, and those are precisely the clauses that protect the homeowner.

How many copies should we sign, and what should I keep?

Sign at least two identical copies, both executed by both parties, with one retained by each side, together with the drawings and BOQ initialled on every sheet. From then on, keep the variation orders, the inspection sheets for each payment stage and the transfer receipts together in the same file for the whole project.

We have already signed. Can the wording still be changed?

Yes, by drawing up an addendum to the contract stating which clause is being amended, what the original wording was and what it now says, signed by both parties. Crossing words out in the contract itself without both signatures alongside the change invites an argument later on.