When talking about a contract, many people usually assume that it is all about writing down what the parties agreed upon. In the eye of the law, it is not that simple. There are many factors which need to be considered when preparing a contract. Certainty of Contract Principle is one of the most important factors which should be taken into account when drafting an agreement.

The Certainty of Contract Principle is a principle of law developed under common law system. The principle talks about an establishment of contracts: the agreement must (1) be clear and (2) agreed (by the parties) on the essential parts otherwise it will not constitute an agreement. If the agreement doesn’t have enough certainty in the contract or is not agreed on the essential parts, the agreement will be invalid.

Thai law also adopts the Certainty of Contract Principle in our Civil and Commercial Code, paragraph one of Section 366 which stipulates:
Section 366. “So long as the parties have not agreed upon all points of a contract upon which, according to the declaration of even one party, agreement is essential, the contract is, in case of doubt, not concluded. An understanding concerning particular points is not binding, even if they have been noted down.”

In practice, the principle is also used by the court as seen in the Supreme Court Judgment No. 3874/2549 where a debtor agreed to transfer a plot of land to the creditor instead of paying back the monetary loan. Since the land price is lower than the actual amount of debt, the debtor also agreed to pay the creditor an extra amount of money on top of the land transfer. However, the amount of the extra money was not agreed by the parties. The Supreme Court in this case ruled that, since the parties have not agreed on the how much money will be given to the creditor on top of the land transfer (the essential part of the contract), the agreement is not concluded and will not be valid according to Section 366 paragraph one of the Civil and Commercial Code. Consequently, the creditor in this case would not have any right over the land.

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It is very crucial to keep in mind the Certainty of Contract Principle when preparing an agreement to make sure that all the terms and conditions agreed are legally binding and valid. Contact JNP Legal office to see how our professional contract lawyers can help you with writing contracts the right way.