28 August 2020
Thailand

In Thailand, the specific laws on consumer right on defective goods can be found in sections 472-474 of Civil and Commercial Code, the Consumer Protection Act B.E.2522 (1979) and the Consumer Case Procedure Act B.E. 2551 (2018). While the laws allow for complaints of defective goods to be filed either with the courts or the Consumer Protection Board, in practice, they are problematic and impractical for the consumers at large. The existing laws do not provide a clear definition of “defect” or specifically deal with the process or criteria of repair, replacement or other remedies that consumers can use including the timeframe for business operators’ liability to remedy the problem. In order to get compensation from any defective products, the consumers must bring the case through the competent court. The court process, even though it has been somewhat optimised by the Consumer Case Procedure Act, can still take too much time and effort for general consumers. It requires some technical legal knowledge for the case to be truly successful.

Lemon Law, a US law concept, specifically deals with the protection of consumer’s right with regards to defective motor vehicles. There have been numerous undesired and unresolved cases between the consumers and automotive brands in Thailand where the existing laws do not favour consumers in term of remedy and burden of proof for the actual defect and cause of defect in the lawsuits as it intended. Car owners will usually file complaints with the Office of Consumer Protection Board and go through negotiations with the automotive brands for compensation which could not amicably be reached. While the owners of the defective cars prefer the automaker to buy back the defective car, with full or partial refund plus compensation for damages they had to suffer, the laws do not compel the automakers or business operators to do so. As such, consumers ended up having to file complaints to the courts for monetary compensation.

In 2017 over 400 Ford car owners filed a first class-action lawsuit against Ford Thailand for false advertising and defects in PowerShift transmission, Ford’s six-speed dual clutch semi-automatic gearbox (DPS6) in Ford Fiesta and Ford Focus. Initially, the affected consumers addressed their complaints to the Office of Consumer Protection Board, but the process took too much time and the affected consumers felt that the process was not transparent. They then decided to file a class-action lawsuit demanding the automaker to buy back their cars for full refund and compensated them for additional damages suffered instead. Finally, in 2018, the Southern Bangkok Civil Court ordered Ford Sales & Service (Thailand) to pay 291 car owners compensation ranging from THB20,000 to 200,000 (THB23 million in total) for the sale of substandard vehicles in the country plus 7.5 % interest per year for repair costs and lost time, lawyer fees for the consumers and a designated reward which was required by law as it had lost the case.[1]

In order to have better protection for consumers at large, several parties have attempted to amend the current laws and enact a defect liability law in Thailand. The drafts have been under the consideration of the legislative authorities for a number of years. The Office of the Law Reform Commission had drafted the Defect Liability Act (“Draft Act”) and which was then sent to the Cabinet for approval in principle in November 2017. The Draft Act was then sent to the Office of the Council of State for further consideration. Recently, in June 2020, the Office of the Consumer Protection Board held public hearing procedures on the Draft Act and conducted a session with representatives from the Court of Justice, Department of Internal Trade of Thailand, the Office of the Council of State, Department of Science Service, Foundation for Consumers, the Joint Standing Committee on Commerce, Industry and Banking and Department of Land Transport for comment on the draft act.

The Draft Defect Liability Act

The Draft Act was drafted as a separate act rather than as an amendment to existing acts.

A summary of the key provisions are as follows:

The Draft Act defines “buyer” to includes a transferee or person who got the assignment of right in the product from the former owner. The seller is liable for any defect that exists at the time of the delivery. This is regardless whether the seller was aware of the defect and if the defect is detrimental to the price of the product or suitability of the product (regardless whether such purpose was as intended in the contract, ordinary purpose or purpose for intended usage). Where the buyer obtains the knowledge of the product, either from the seller or their representative, the seller will need to prove that the details of the product have changed over time or that the product detail did not influence the decision of the buyer.

In the case of a product that requires installation or assembly according to the manual prepared by the seller, the seller is liable for the defect of the product where the seller installs the product or the manual provides incorrect or incomplete instruction when the buyer attempts to install or assemble the product. The law will also presume that if the product is defective within six months of delivery, the product was defective at the time of delivery.

When it has been determined that the seller is liable for the defect of the product, the buyer has the following rights:

  • Demand the seller to repair the product

If the buyer chooses for the seller to repair the product, the buyer cannot deny the receipt of the product that has been repaired/rectified without defect within 60 days from the date the product was received for repair. The seller may refuse to repair the product and replace it with the same type and kind of product that is defect-free in the event that the repair will cause unreasonable burden to the seller. The buyer cannot deny the receipt of the replacement product. In the event that the seller cannot repair the defect within the 60 days period or the seller refuses to repair with no replacement, the buyer has the right to demand a discount of the product price or to terminate the contract.

  • Demand the seller to replace the product

If the buyer chooses for the seller to replace the product, the seller may repair the product first if the replacement will cause an unreasonable burden to the seller. The buyer cannot deny the receipt of the product that has been repaired/rectified without defect within 60 days from the date the product was received for repair. In the event that the seller refuses to replace the product and refuses to repair or the seller chooses to repair yet cannot repair the defect within the 60 days period, the buyer has the right to demand a discount of the product price or to terminate the contract.

  • Demand a discount of the product price

If the buyer chooses to demand a discount of the product price, the seller may repair or replace the product with a defect-free product first if the discount will cause an unreasonable burden to the seller. The same principle of repair or replacement shall be applicable as the case may be.  If the seller refuses to replace, to repair or to discount price of the product, the buyer has the right to terminate the contract.

  • Cancel the contract

The buyer can exercise the right to terminate the contract by giving a written intention to the seller within six months from the date the right of termination conceived. Upon the termination, the seller can deduct the depreciation value from the use of the product, from the date the product was returned, from the money that the seller has to return to the buyer. The money that the seller has to return to the buyer in case of discount or termination of the contract shall include the interest incurred from the date the seller received the money.

The buyer may exercise the above rights without prejudice to any right to claim for damages and costs that is necessary and appropriate from the seller.

If the defect is minor, the buyer may request for the product to be repaired first. The consideration for repair, replacement and discount that cause unreasonable burden shall be determined by the type and kind of product, value of the product, defect of the product, time required for repair, expenses for the repair and other appropriate considerations.

The seller is not liable for the defect of the product when (i) the buyer is aware of the defect at the time of sale, but if the seller conceals the defect or provide warranty to the buyer, the seller is still liable for the defect of such product, or (ii) the buyer buys the product from auction. Any agreement to exempt liability for defect prior to the buyer discovering defect is contrary to the provisions of the Draft Act and is unfavourable or onerous to the buyer, shall become void.

The prescription period for the buyer to demand the seller to be liable for the defect is one year:

  • from the date of discovery of the defect; or
  • at the time of refusal of the seller as prescribed by the Draft Act; or
  • at the time the seller agrees to repair or replace the product.

If the prescription period lapses pending delivery from the seller for the repair or replacement or it will expire within 60 days from the date the seller delivers the repaired or replaced product, the prescription period shall not expire until the lapse of 60 days from delivery.

For a product under hire-purchase contract (leasing), the lessee shall entertain the same rights as a buyer to hold the lesser liable. During the period of demand for repair or replacement, the lessee has the right to halt the lease payment until receipt of the product defect-free and continue to pay the lease payment for the remaining instalments. If the lessee requests a discount, the installments shall be recalculated proportionately. If the lessee terminates the sale contract, which is the foundation of the hire-purchase contract, the hire-purchase contract shall be terminated at once.

If the lesser is a financing party under the hire-purchase contract or similar arrangement where the lessee contacts and buys the product directly from the seller and the lesser pays the product price directly to the seller, the rights of buyer under the Draft Act shall be assigned from the lesser to the lessee and the lessor shall ensure that the lessee can exercise the rights directly to the seller. Under this arrangement, if the lessee demand for a repair, replacement, discount or termination of contract, the said action shall not affect the rights and obligation under the hire-purchase contract. In the case of a replacement, the lessee shall inform the lesser in writing and upon approval from the lesser, the replacement product shall become the subject matter of the hire-purchase contract. In the case of a termination, the lessee shall notify the lesser in writing before termination and after the termination is exercised, the lessee shall return the product to the seller and it is deemed that the lessee has returned the leased product to the lesser. The return of money shall be first paid for the lease payment for the lessee and the remaining amount returned to the lessee. If there is any outstanding amount, the lessee shall be liable for repayment of such.

The Draft Act shall also apply to exchange contract whereby the parties are the sellers of the property delivered and buyers of the property received in such exchange.

The provisions of the Draft Act shall not prejudice the right of the buyer to any defect liability under any other laws, or the interruption of the prescription period under the Civil and Commercial Code or the stay of prescription period under the Consumer Case Procedure Act.

Current Stage

Once the Draft Act is finalised, it will be sent to the Cabinet and the parliament for consideration and approval which will eventually be endorsed by the King for His Royal Signature and publication in the royal gazette. Once it has been published in the royal gazette, the act will come into force as law after 120 days. The development of defect liability law in Thailand has taken a long road and is closer to enforcement. With several attempts to develop consumer protection measures in Thailand, the authorities are pushing for the enactment of this law in parallel with other ongoing developments for the benefit of general consumers. The regulatory bodies are also considering codifying the consumer protection laws for effective enforcement and streamlined consumer protection. Businesses should be made aware of the Draft Act and take the opportunity to identify if any changes need to be made to the design, warnings, instruction and labels of their products.

If you have any questions or require any additional information, please contact Threenuch Bunruangthaworn, Archaree Suppakrucha or Panwadi Maniwat of ZICO Law Thailand or the partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.

[1]  Piyachart Maikaew, ‘Ford to pay B23m to car owners in class-action ruling’ (Bangkok Post, 22 September 2018) <https://www.bangkokpost.com/business/1544518/ford-to-pay-b23m-to-car-owners-in-class-action-ruling>.