A. Applicable Thai Law

There are presently no laws in Thailand that specifically address the sale of goods via the Internet but the government is in the process of drafting several pieces of legislation (see Section B hereunder). Until such measures are implemented, all Internet transactions over which Thai courts have jurisdiction will be governed, for instance, by reference to the general provisions of the Civil and Commercial Code ("CCC"), the Consumer Protection Act B.E. 2522 (A.D.1979), the Revenue Code B.E. 2481 (A.D. 1938), the Customs Law B.E. 2469 (A.D. 1926), the Excise Tax Act B.E. 2527 (A.D. 1984), the Unfair Contract Terms Act B.E. 2540 (A.D. 1997), the Conflicts of Law Act B.E. 2481 (A.D. 1938), the Copyright Act B.E. 2537 (A.D. 1994) and the Thai Constitution B.E. 2540 (1997).

The lack of a specific regulatory framework may entail significant problems as the existing laws were designed to regulate traditional commercial sales. Yet rapid changes in telecommunications have resulted in business practices that are vastly different from those contemplated by the existing legislation.

The following are certain provisions that may be relevant to the sale of goods on the Internet:

a) Sale Of Goods By Description

  • A provision is made in the CCC for the sale of goods by description. Section 503, paragraph 2, of the CCC states that "[I]n a sale by description, the seller is bound to deliver property corresponding to the description." In cases where goods do not fit the description, the buyer may refuse acceptance of the goods and require repayment, or the buyer may claim compensation for any loss suffered. In the online world, where text and alterable still pictures are commonly used to aid in a description, there is an added ease in deceiving the purchaser. This Section may address any deceit attempted by the on-line seller.

b) Unfair Contract Terms

  • The Unfair Contracts Act B.E. 2540 (A.D. 1997) provides Thai courts with great discretion to determine whether contract terms are unfair or unreasonable. Contracts subject to the Act include consumer contracts, standard form contracts and hire purchase contracts. Any term therein that places an excessive burden on one party and gives a sizeable advantage to another party is likely to violate the Act, in which case the court may limit or void any such unfair contractual agreement.

c) False And Misleading Advertising

  • The Consumer Protection Act (No. 2) B.E. 2522 (A.D. 1979), while not specifically dealing with Internet commerce, does contain provisions relating to false and misleading advertising. Such misleading advertising, even if it occurs in Cyberspace, would be covered by the Consumer Protection Act.

d) Requirement For Written Evidence

  • Section 456, paragraph 2, of the CCC states that in cases where the agreed price is more than 500 Baht (approximately US $14) "an agreement to sell or to buy…is not enforceable by action unless there be some written evidence signed by the party liable or unless earnest is given, or there is part performance." This clause would seem to indicate that in purchases over the Internet where an agreement is reached but no payment made or performance begun, the agreement is not enforceable under Thai law simply because there is no signature on the agreement. However, the proposed Electronic Signature Law should provide a mechanism to make online agreements binding even without a written signature (see Section B hereunder).

e) Sales Taxes And Customs Duties

  • Thailand's Revenue Department has announced that the sale of goods via the Internet is subject to the same taxes and customs duties that apply to conventional purchases. This means that online sales involving persons under Thai jurisdiction are potentially subject to Value Added Tax ("VAT"), customs duties, and excise tax, depending on, among other things, the location of the purchaser and the nature and origin of the goods.

It is widely acknowledged that tax laws and customs laws will not be easy to enforce in relation to e-commerce transactions. For instance, the taxation of online sales of intangible goods (such as watching a movie or listening to music over the Internet) will be dependent on the honesty of the purchaser or importer in notifying the authorities of the existence of the transaction and the value of the goods. Evasion, however, runs the risk of fines and imprisonment.

f) Governing Law

The determination of the applicable law is certainly one of the most complex issues in dealing with e-commerce transactions. The laws of every country reached by a website could potentially apply to any e-commerce transaction. This paper only deals with Thai law, but any other jurisdiction could assert competence and declare its laws applicable to an e-commerce transaction taking place in its territory or involving one of its nationals.

In cases involving contracts where one party is located out of the Thai jurisdiction, Section 13 of The Act on Conflict of Laws B.E. 2481 (A.D. 1938) allows the parties to a contract to determine which law they intend to be bound by. However, if there is no agreement with respect to the applicable law, the Court will make the determination based on a few set guidelines. The provisions of Section 13 and a few possible applications of the guidelines are outlined below.

1. "If the parties are of the same nationality, the laws of that country will apply."

    • · If a Thai national makes a purchase from a Thai company's website, the applicable law for any dispute would be that of Thailand. Both parties are Thai nationals and therefore Thai law will apply (and it should not matter where the website is hosted or whether the company's Internet Service Provider ("ISP") is in Thailand or in another country).

2. "If the parties are not of the same nationality, the law of the country where the contract has been made will apply.

    • If a non-Thai national in Thailand makes a purchase from a Thai company's website (with the ISP located in Thailand), the applicable law would again be that of Thailand. As both parties are located in Thailand and dealing with each other through a Thai company's website, then Thai law applies because the contract is formed in Thailand.

3. "In instances where a contract has been made between parties at a distance [as is often the case with e-commerce], the country where the contract is deemed to have been made is the country where notice of the acceptance reaches the seller. If such a place cannot be ascertained, the law of the country where the contract is to be performed shall govern."

    • If a non-Thai national abroad makes a purchase from a Thai company's website (with the ISP located in Thailand), then the contract is made at a distance, and as per Thai law, the applicable law is the law of the country where the seller receives the notice of acceptance from the buyer. In most traditional sale of goods situations, the notice of acceptance would be received in the seller's country, the same place where the contract is to be performed. However, this is not necessarily the case, as for example, the notice of acceptance could be received by the seller while in a third country.
    • Where the notice of acceptance "reaches" the seller in e-commerce transactions is unclear. Possibilities include (i) where the seller's website is hosted; (ii) where the seller's ISP is located; (iii) the country of seller's nationality; or (iv) the country where the seller is when notice of buyer's acceptance is retrieved.

It is apparent that the nature of e-commerce transactions has injected a degree of uncertainty into the determination of the governing law. This matter will ultimately be determined by the Thai courts.

g) Moment Of Contract Formation

The moment at which an e-commerce contract is formed is also important, especially where an offer lapses after a certain period of time. Under Thai law, a contract is formed the moment the buyer's acceptance is received by the seller. But when is the acceptance actually "received" by the seller? It could be that the acceptance is considered "received" by the seller when it is sent by the buyer (by clicking "send"). Or it could be that the acceptance is considered "received" by the seller when it reaches the seller's ISP or its website. It is also possible that all of these events will occur virtually simultaneously. Again, this issue will ultimately be determined by the Thai courts.

B. Draft E-Commerce Laws

Presently, several sub-committees which have been appointed by the National Information Technology Committee ("NITC"), under the Prime Minister and the Ministry of Science, Technology and Environment, are working on the drafting of six new laws concerning information technology ("IT"). The National Electronic and Computer Technology Center ("NECTEC") is also working along with the sub-committees as a secretariat office. Each IT law is the responsibility of a separate sub-committee chaired by one legal expert and comprised of various representatives from concerned agencies.

In recognition of the need to promote public confidence with respect to the boom of electronic transactions and the need to establish a viable framework, the government hopes that the first two e-commerce bills below can be implemented in the near future.

A brief description of each proposed IT law follows:

1) Electronic Transaction Law

    • The Electronic Transaction Bill was approved, in principle, by the Cabinet on March 14, 2000 and sent to the Office of the Council of State for revisions. The bill was drafted with the aim of ensuring an effective legal framework to successfully enforce electronic contracts and allowing the courts to accept evidence in the form of electronic documents.

2) Electronic Signature Law

    • The Electronic Signature Bill was also approved, in principle, by the Cabinet on March 14, 2000 and sent to the Office of the Council of State for revisions. The Bill should offer security of electronic commerce transactions through the mandated use of asymmetric-key cryptography which can assure that a digital signature is a valid indication of the authenticity of a source of information;
    • Such technology is intended to provide for certainty of binding contracts when acceptance is given only by electronic methods without a "written" signature;
    • The bill as presently drafted calls for certification authorities ("CA") to be licensed and entrusted with the task of certifying the identity of vendors and purchasers who conduct business over the Internet; until a national CA Committee is established to oversee the award of CA licenses, NECTEC may act as the CA regulator.

3) Electronics Fund Transfer ("EFT") Law

    • The EFT Law shall provide consumer protection and establish security procedures in electronic funds transfers.

4) Data Protection Law

    • The Data Protection Law should be similar to those of the European countries, which specifically protect the right of privacy regarding personal data. The owner of the data should be protected from unauthorized use of his/her personal data through the electronic processing of data. The Law should also balance privacy rights with the freedom to exploit information technology. In other words, the Law shall provide protection from unfairly interfering with privacy rights but shall not block the development of information technology.

5) Computer Crime/Computer-Related Crime Law

    • The Computer Crime Law should clarify new types of criminal offences that may occur in the virtual realm of the Internet.

6) Universal Access Law

    • The Universal Access Law should promote the universal access to the Internet via the National Information Infrastructure pursuant to the Thai Constitution.

C. Precautionary Measures

In order to enhance the potential validity of e-commerce transactions in Thailand, on-line businesses should consider taking, among others, the following precautions :

    1. Jurisdiction clause - companies should insert proper wording on their websites to the effect that all transactions relating to the subject matter shall be governed by Thai law within the exclusive competence of Thai courts. Whether such election of governing law and jurisdiction would be recognized and enforced by a foreign jurisdiction is another issue.
    2. Clear and obvious relevant disclaimers - subject to their enforceability, the insertion of disclaimers will help ensure that both parties have a clear understanding of their respective obligations and may serve as a mitigating factor.
    3. Written confirmation before performance - until the new law on electronic signatures is passed, written confirmation should be obtained; such confirmation is more likely to be recognized as evidence by the Thai courts.
    4. Protect IP rights over the Internet - in conducting transactions over the Internet and posting business websites, it should be clearly stated that the material is copyrighted (if applicable) or that there is a registered trademark in existence in order to raise public awareness.
    5. Security of personal data - companies should be diligent and alert when transferring personal data via the internet and provide an adequate security system for business activities.

This document on Sale of Goods in Cyberspace is intended to provide general information. The contents do not constitute legal advice and should not be relied upon as such. If legal advice or other expert assistance is required, the services of competent professionals should be sought.