The earthquake on March 28, 2025, caused not only significant damage to the project owner and contractors, but also resulted in casualties among construction workers at the construction site. It raises a critical question for the stakeholders in the construction industry: “Who should be held liable for damage caused by such natural disasters?“
For a building construction project commissioned by a state agency and awarded to a private contractor, the construction contract must adhere to the standard contract prescribed under the Government Procurement and Supplies Management Act B.E. 2560 (2017) (the “Procurement Act”). The standard contract is part of the Terms of Reference provided to contractors who participate in the bidding process. Accordingly, the liability of each party must be determined in accordance with the provisions set forth in the contract along with applicable Thai laws.
An earthquake is a type of natural disaster which may constitute as a force majeure event, potentially relieving a liable party from responsibility arising from such an occurrence. This article analyses Thai laws on how liability arising from force majeure or natural disasters is determined in both government and private construction contracts as well as insurance-related contracts in Thailand, and whether a liable party could invoke force majeure in this scenario. This analysis also aims to explore applicable risk management approaches and equip legal practitioners and stakeholders in the construction industry with general understanding of the rights, duties, and liabilities under Thai laws.
A. Cases and Judicial Interpretations
Government Construction Contracts in Thailand: Strict Liability of Contractors
Construction projects where the government is the employer have a special characteristic: the contractor’s liability is strictly defined in the standard contract form1 with little to no window to negotiate and amend the terms. The key provisions regarding contractor liability in cases of damage from natural disasters are as follows:
- Strict Liability Principle: Clause 11 of the standard contract form clearly stipulates that contractors must be responsible for repairs or reconstruction at their own expense in any and all circumstances, even if the damage is caused by force majeure such as natural disasters, unless the damage is caused by the employer’s actions. This means that if a construction project is under construction or is completed but has not been handed over and accepted by the state agency and is damaged by earthquakes, floods, storms, or other natural disasters, the contractor remains responsible for repairs or reconstruction without exception. This provision reflects the government’s intention to protect public interests and national budget.
- Additional Liability Extensions: In addition to liability for the construction work itself, contractors under government construction contracts also have liability toward related persons for example, to provide insurance for all hired workers2, and be liable for accidents, damages, or dangers to employees, representatives, and third parties, including compensating for any damages and expenses of the employer if the employer is claimed against or sued by third parties due to the damages that occur3.
- Case Study: The Collapse of a State Agency’s Building
Following the earthquake on March 28, 2025, an analysis of the terms set forth in the construction contracts suggests that the contractors could face full liability for both reconstruction costs and worker casualties, despite their argument that the earthquake was an unforeseeable event beyond their control. Nevertheless, the contractors may seek recourse for such damages from the insurer pursuant to the terms of the applicable insurance policy, which will be addressed in a subsequent section.
Private Construction Contracts in Thailand: Flexibility and Negotiation
In contrast, construction contracts between private parties offer more flexibility in determining the liability of the contracting parties:
- Negotiable Risk Allocation: Contracting parties can negotiate conditions related to liability in case of natural disasters according to appropriate and acceptable risks. These may include provisions releasing contracting parties from certain liability for force majeure events or granting timeline extensions.
- Industry Practice: Common practice in private contracts typically includes partial risk-sharing models, where direct reconstruction costs might be borne by the contractor but timeline extensions are granted without penalties, and additional costs may be subject to negotiation.
While construction contracts between private parties allow for greater flexibility in determining which natural disasters or events may qualify as “force majeure” that potentially releases the contractor from liability. Definition of “force majeure” must still be assessed in light of the specific terms set out in the construction contract, as well as relevant legal principles and precedents established by Thai court judgments.
Force Majeure: Interpretation Principles According to Thai Law and Court Precedents
A key issue in this area is to interpret which events are considered force majeure under Thai law, which directly affects liability and exemption of contracting parties.
Section 8 of the Civil and Commercial Code defines force majeure as “an event that could not be prevented, even though the person who would encounter such event has exercised appropriate care expected of a person in such position and circumstances.” In determining which natural disasters constitute force majeure, the Thai Supreme Court has established two important principles (1) Foreseeability test; and (2) Preventability test:
- Foreseeability Test: The natural disaster must be an event that the contracting parties could not have anticipated. For example,
- in Supreme Court Decision No. 1194/2531, this Supreme Court decision articulates the principle that force majeure requires genuine unforeseeability – an event must be one that the affected party could not reasonably anticipate. The Court distinguishes between truly unforeseeable occurrences during rainy season (such as flash floods causing bridge collapse) which qualify as force majeure, versus predictable seasonal phenomena (like rising river levels) which do not constitute force majeure, as they remain within the realm of reasonable expectation for affected parties.
- Another example is Supreme Court Decision No. 7973-7975/2548, the fact of the case is Defendant No. 4, an employee of Defendants No. 2 and No. 3, negligently drove a truck carrying explosives owned by Defendant No. 1 at excessive speed, causing it to overturn and scatter explosives onto the road. Certain local bystanders gathered at the scene interfered with the explosives, triggering an explosion that resulted in casualties and property damage. The Supreme Court held that force majeure must be unforeseeable and unavoidable even with reasonable precautions. For this incident, the explosion was foreseeable as Defendant No. 1 failed to implement adequate preventive measures at the accident site, such as warning signs of explosive and reflective markings, as it is common for bystanders to gather at accident sites. Therefore, the explosion did not constitute force majeure.
- Preventability Test: Even if the natural disaster is an unforeseeable event, it may not be considered force majeure if implementation of reasonable precautions could have prevented the damage. The Supreme Court Decision No. 7680/2548, the Court established that even when operating within technical limits (cargo weight below maximum capacity), the failure to take reasonably foreseeable preventive measures against foreseeable risks (waves pattern in a shipping channel) precludes the application of force majeure defense, as the incident was preventable through proper precautionary measures expected of maritime professionals.
These principles for interpreting force majeure are extremely important for parties in disputes relating to liability for damages from natural disasters, as they serve as criteria the court uses to determine whether an event will result in the contractor being released or relieved from liability in the case of private contracts or will affect requests for construction timeline extensions.
B. Risk Management and Insurance
Risk Management Through Insurance: A Shield Against Damage
When considering potential liability from natural disasters under both government and private construction contracts, risk management through insurance becomes a crucial strategy that contractors should consider and implement. Contract Works Insurance provides coverage in three main areas: Building and Civil Engineering Works, Machinery Erection, and Third-Party Liability. Building and Civil Engineering Works and Machinery Erection will cover property damage insurance on an “All-Risks Basis”, covering accidents or unforeseeable events, including natural disasters. Third-Party Liability coverage will protect against damages from injury, death, illness, or property loss of third parties related to the performance of contract work and occurring at the insured location or nearby areas.
In practice, since each contractor may be responsible for only certain parts of a project, insurance companies provide coverage specifically for work components that the insured is responsible for. This is divided into two types of casualty insurance contracts:
- Contractor’s All Risks Insurance (CAR) for contractors responsible for building construction structures and architectural work, covering both the construction work itself and third-party liability.
- Erection All Risks Insurance (EAR) for contractors installing machinery and systems within buildings, covering both machinery installation work and third-party liability.
Insurance Limitations and Legal Precedents in Construction Risk Management
To cover potential claims arising from natural disasters, a liable party should ensure that appropriate insurance coverage is in place. While construction insurance provides essential protection, contractors must be aware of significant coverage restrictions that may affect claims related to natural disasters. Notably, Section 879 of the Civil and Commercial Code establishes two key limitations on an insurer’s liability:
- First, an insurer is not liable for losses or from specified circumstances that derived from the insured party’s or beneficiary’s dishonesty or gross negligence. This provision protects insurers from having to pay claims where the insured’s own serious misconduct caused the loss.
- Second, an insurer is not responsible for losses that directly result from inherent defects or flaws in the insured property itself. This refers to damage caused by the property’s own inherent characteristics or composition rather than external factors. However, this limitation can be overridden if the parties specifically agree to include such coverage in their contract.
In construction contracts, when damage occurs due to natural disasters, the insurer remains liable if the event is covered by the policy and was not exacerbated by the contractor’s dishonesty or gross negligence. However, under Section 879, if the contractor’s gross negligence contributed significantly to the damage (such as ignoring severe weather warnings or building code requirements), the insurer may be relieved of liability.
Based on the above considerations, taking out an insurance policy alone may not be sufficient. Insurance companies may deny coverage if they can prove that the natural disaster does not constitute force majeure under legal principles, or if the contractor did not exercise adequate caution according to construction industry professional standards. Therefore, construction contractors should carefully check insurance policy terms and conditions and strictly adhere to safety standards and professional standards to ensure they will receive coverage when damage from natural disasters occurs.
Contractual Risk Management
In addition to construction insurance, effective contractual risk management or allocation strategies may help reduce potential risks. The considerations are as follows:
- Clear Force Majeure Definitions: Explicitly defining force majeure in construction contracts, with specific enumeration of qualifying natural disasters and their parameters or exclusion of certain specific events (e.g., earthquakes above a certain magnitude).
- Risk Allocation Clauses: Including detailed provisions on which party bears the risk for various types of events, with potential sharing mechanisms for extraordinary events.
- Notice Requirements: Establishing clear protocols for notifying force majeure events, documenting damage, and implementing mitigation measures.
- Extension of Time Provisions: Creating mechanisms for contractors to obtain time extensions without financial penalties when force majeure events occur.
- Cost-Sharing Mechanisms: Developing formulas or procedures for equitable sharing of additional costs arising from natural disasters depending on their severity and predictability.
Preventive Measures and Damage Mitigation
Apart from insurance and contractual provisions, practical risk management includes:
- Site-Specific Risk Assessment: Conducting thorough geological and environmental studies prior to commencing the construction to identify potential natural disaster risks specific to the location.
- Disaster-Resistant Design: Incorporating engineering solutions specifically designed to withstand known regional natural hazards, such as seismic-resistant structures in earthquake-prone areas.
- Emergency Response Planning: Developing comprehensive emergency protocols to be implemented immediately following a natural disaster to minimize casualties and secondary damage.
- Regular Safety Audits: Conducting periodic inspections during construction to ensure compliance with safety standards and identify potential vulnerabilities.
- Weather Monitoring Systems: Implementing early warning systems for weather-related disasters to allow for preventive actions.
C. Trends and Analysis
Climate change and recent legal developments are significantly altering the legal landscape around force majeure and construction liability in construction contracts as follows:
- Increased Frequency and Intensity: With natural disasters becoming more frequent and severe, “extraordinary” events in the past may now be considered foreseeable, potentially narrowing the scope of force majeure.
- Evolving Judicial Interpretation: Thai courts begin to consider climate science in determinations of what constitutes a foreseeable natural event versus a genuine force majeure event.
- Adaptation Requirements: There is a growing trend toward requiring contractors to incorporate climate resilience measures into construction, with failure to do so potentially undermining force majeure claims.
- Updated Building Codes: New amendments to Thai building regulations in 2021 require enhanced structural resistance to earthquakes in high-risk zones, potentially affecting the concerned parties’ liability if not followed.
D: Conclusion: Managing Natural Disaster Risks in Thai Construction Contracts
The liability framework governing natural disaster damage in Thai construction contracts presents distinct challenges for industry stakeholders. Government contracts typically impose strict liability on contractors even in force majeure events, while private contracts offer greater flexibility in risk allocation.
As climate change continues to intensify extreme weather events across Thailand, construction professionals must implement robust risk management strategies, for example:
- Precise Contract Drafting: Ensure force majeure provisions clearly delineate responsibilities and liability limitations with specificity tailored to project location and risk profile
- Comprehensive Insurance Coverage: Secure appropriate Construction All Risk (CAR) and Erection All Risk (EAR) policies with specific riders addressing regional natural disaster threats
- Proactive Compliance: Adhere to evolving building standards and implement preventative measures exceeding minimum code requirements
This article is for informational purposes only and does not constitute legal advice. For specific guidance on your construction contract matters, please contact our team.
1 Issued under the Announcement of the Government Procurement and Supplies Management Policy Committee on contract forms pursuant to the Procurement Act
2 Clause 12, paragraph 3 of the standard form
3 Clause 11, paragraphs 1 and the final paragraph of the standard contract