Thailand Civil and Commercial Code Sections-680-746

TITLE XI

SURETSHIP

Chapter I

 General Provisions

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Section 680 Suretyship is a contract whereby a third person, called the surety, binds himself to a creditor to satisfy an obligation in the event that the debtor fails to perform it. A contract of suretyship is not enforceable by action unless there is written evidence signed by the surety.

Section 681 Suretyship can be given only for a valid obligation. A future or conditional obligation may be secured for the event in which it would take effect. An obligation resulting from a contract which is affected by mistake or incapacity does not bind the debtor, but can be validly secured if the surety, at the time of entering into the suretyship, is aware of such mistake or incapacity.

Section 682 A person may agree to be surety for another surety. If several persons make themselves sureties for the same obligation, they are liable as joint debtors, even though they do not assume the suretyship in common.

Section 683 Suretyship without limitation covers interest, compensation due by the debtor on account of the obligation, and all accessory charges.

Section 684 The surety is liable for the costs of the action to be paid by the debtor to the creditor, but is not liable for such costs if the action was initiated without first demanding performance from the debtor.

Section 685 If, in the enforcement of the contract of suretyship, the surety does not perform the entire obligation of the debtor, including interest, compensation, and accessories, the debtor remains liable to the creditor for the remaining balance.

Chapter II

Effects Before Performance

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Section 686 As soon as the debtor is in default, the creditor is entitled to demand performance of the obligation from the surety.

Section 687 The surety is not bound to perform the obligation before the time fixed for performance, even if the debtor can no longer take advantage of a period of commencement or termination.

Section 688 When the creditor demands performance of the obligation from the surety, the surety may require that the debtor be first called upon to perform, unless the debtor has been adjudged bankrupt or his whereabouts in Thailand are unknown.

Section 689 Even after the debtor has been called upon as provided in the preceding section, if the surety can prove that the debtor has the means to perform and that execution would not be difficult, the creditor must first seek execution against the debtor’s property.

Section 690 If the creditor holds real security belonging to the debtor, he must, at the request of the surety, first seek performance of the obligation from the real security.

Section 691 If the surety is bound jointly with the debtor, he does not have the rights mentioned in Sections 688, 689, and 690.

Section 692 An interruption of prescription against the debtor also constitutes an interruption against the surety.

Chapter III

 Effects After Performance

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Section 693 The surety who has performed the obligation has a right of recourse against the debtor for the principal and interest, and for any losses or damages suffered due to the suretyship. The surety is subrogated to the rights of the creditor against the debtor.

Section 694 In addition to the defenses available to the surety against the creditor, the surety may also assert defenses that the debtor has against the creditor.

Section 695 A surety who neglects to assert defenses of the debtor against the creditor loses the right of recourse against the debtor to the extent of those defenses, unless the surety proves that he was unaware of such defenses and that his ignorance was not due to fault.

Section 696 The surety has no right of recourse against the debtor if he performs the obligation without informing the debtor, who, in ignorance, performs the obligation. In such a case, the surety may only pursue a claim for undue enrichment against the creditor.

Section 697 If, due to the creditor’s actions, the surety cannot be fully or partially subrogated into the creditor’s rights, mortgages, pledges, and preferential rights which were established before or at the time of the suretyship for the performance of the obligation, the surety is discharged to the extent of the injury suffered.

Chapter IV

Extinction of Suretyship

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Section 698 The surety is discharged as soon as the debtor’s obligation is extinguished for any reason whatsoever.

Section 699 Suretyship for a series of transactions without a limit or fixed term in favor of the creditor can be terminated for future transactions by giving notice to the creditor. In such cases, the surety is not liable for transactions conducted by the debtor after the notice has been received by the creditor.

Section 700 If suretyship has been given for an obligation to be performed at a definite time, and the creditor grants the debtor an extension of time, the surety is discharged unless the surety agreed to the extension.

Section 701 The surety may tender performance of the obligation to the creditor from the time when performance is due. If the creditor refuses to accept performance, the surety is discharged.

TITLE XII

MORTGAGE

CHAPTER I

GENERAL PROVISIONS

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Section 702 A mortgage is a contract whereby a person, called the mortgagor, assigns a property to another person, called the mortgagee, as security for the performance of an obligation, without delivering the property to the mortgagee. The mortgagee is entitled to be paid out of the mortgaged property in preference to ordinary creditors, regardless of whether or not the ownership of the property has been transferred to a third person.

Section 703 Immovables of any kind can be mortgaged. The following movables can also be mortgaged, provided they are registered according to law:

1. Ships of five tons and over.
2. Floating houses.
3. Beasts of burden.
4. Any other movables for which the law may provide registration for that purpose.

Section 704 A contract of mortgage must specify the property mortgaged.

Section 705 No property can be mortgaged except by the owner for the time being.

Section 706 A person whose right of ownership over a property is subject to a condition may mortgage such property only subject to that condition.

Section 707 The provisions of Section 681 concerning suretyship apply mutatis mutandis.

Section 708 A contract of mortgage must contain, in Thai currency, either the sum certain or a maximum amount for which the mortgaged property is assigned as security.

Section 709 A person may mortgage his property as security for the performance of an obligation by another person.

Section 710 The performance of one and the same obligation may be secured by the mortgage of several properties belonging either to one or to several owners. The parties may agree:

1. That the mortgagee shall enforce his rights against the mortgaged properties in a specific order.
2. That each property serves as security only for a specified part of the obligation.

Section 711 Before the obligation is due, any agreement that the mortgagee shall, in case of non-performance, become the owner of the mortgaged property or dispose of it otherwise than in accordance with the provisions concerning the Enforcement of Mortgage shall be invalid.

Section 712 Notwithstanding any clause in the contract to the contrary, a property mortgaged to one person may be mortgaged to another person during the continuance of the previous contract.

Section 713 Unless otherwise agreed in the contract of mortgage, the mortgagor may pay off the mortgage by installments.

Section 714 A contract of mortgage must be made in writing and registered by the competent official.

CHAPTER II

EXTENT OF MORTGAGE

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Section 715 A mortgaged property is security for the performance of the obligation and for the following accessories:

1. Compensation in case of non-performance of the obligation.
2. Costs of enforcement of the mortgage.

Section 716 A mortgage, even if only partially performed, extends to all the properties mortgaged and to the whole of each of them.

Section 717 If a mortgaged property is divided into parcels, the mortgage continues to extend to each and all of such parcels.

Section 718 A mortgage extends to all things connected with the mortgaged property, subject, however, to the restrictions contained in the following sections.

Section 719 A mortgage over land does not extend to buildings erected by the mortgagor upon such land after the date of the mortgage, unless there is a special clause in the contract to that effect. However, in any case, the mortgagee can have such buildings sold with the land, but he can exercise his preferential right only against the price obtained for the land.

Section 720 A mortgage over buildings erected or constructed on or under the land of another person does not extend to such land, and vice versa.

Section 721 A mortgage does not extend to the fruits of the mortgaged property except after the mortgagee has notified the mortgagor or the transferee of his intention to enforce the mortgage.

CHAPTER III

RIGHTS AND DUTIES OF THE MORTGAGEE AND MORTGAGOR

 

Section 722 When a property has been mortgaged and a servitude or other real right is registered after the registration of the mortgage without the consent of the mortgagee, the mortgage has priority over the servitude or other real right, and the latter will be erased from the register if its existence prejudices the mortgagee’s right to enforce the mortgage.

Section 723 If the mortgaged property is damaged, or if one of the mortgaged properties is lost or damaged so that the security becomes insufficient, the mortgagee may enforce the mortgage at once, unless the mortgagor is not at fault and offers either to mortgage another property of sufficient value or to repair the damage within a reasonable time.

Section 724 A mortgagor who has mortgaged his property as security for the performance of an obligation by another person and performs the obligation on behalf of the debtor to prevent the enforcement of the mortgage is entitled to recover from the debtor the amount of the performance. If the mortgage is enforced, the mortgagor is entitled to recover from the debtor the amount by which the mortgagee has been satisfied through such performance.

Section 725 When two or more persons have separately mortgaged their properties as security for the performance of one and the same obligation by another person and no order has been specified, the mortgagor who has performed the obligation, or on whose property the mortgage has been enforced, has no right of recourse against the other mortgagors.

Section 726 When several persons have separately mortgaged their properties as security for the performance of one and the same obligation by another person and an order has been specified, the release granted by the mortgagee to one of the mortgagors discharges the subsequent mortgagors to the extent of the injury suffered by them thereby.

Section 727 If a person has mortgaged his property as security for the performance of an obligation by another person, the provisions of Sections 697, 700, and 701 concerning suretyship shall apply mutatis mutandis.

CHAPTER IV

ENFORCEMENT OF MORTGAGE

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Section 728 For the enforcement of a mortgage, the mortgagee must notify the debtor in writing to perform his obligation within a reasonable time to be fixed in the notice. If the debtor fails to comply with such notice, the mortgagee may file an action in court for a judgment ordering the mortgaged property to be seized and sold by public auction.

Section 729 In addition to the remedy provided in the foregoing section, the mortgagee is entitled to claim foreclosure of the mortgage, subject to the following conditions:

1. The debtor has failed to pay interest for five years;
2. The mortgagor has not satisfied the court that the value of the property is greater than the amount due; and
3. There are no other registered mortgages or preferential rights on the same property.

Section 730 When one and the same property is mortgaged to several mortgagees, they rank according to the respective dates and times of registration, with the earlier mortgagee being satisfied before the later one.

Section 731 A later mortgagee cannot enforce their right to the detriment of an earlier mortgagee.

Section 732 The net proceeds of the auction shall be distributed to the mortgagees according to their ranks, and any surplus, if any, shall be delivered to the mortgagor.

Section 733 If the estimated value of the property in a foreclosure case, or the net proceeds from an auction, is less than the amount due, the debtor of the obligation is not liable for the difference.

Section 734 When several properties have been mortgaged to secure one and the same obligation and no order has been specified, the mortgagee may enforce their right against all or any of the properties, provided that they do not enforce the mortgage on more properties than is necessary for the satisfaction of their right. If the mortgagee enforces their right against all properties at the same time, the burden of the obligation is divided according to the respective values of the properties, except where the amounts of the mortgages have been specified for each property, in which case the division is made according to the respective amounts of the mortgages on such properties. If, however, the mortgagee enforces their right against one of the properties, they may receive performance of the entire obligation from that property. In that case, the mortgagee who is next in rank shall be considered as being subrogated to the prior mortgagee and may enforce the mortgage in the prior mortgagee’s stead to the amount which the prior mortgagee would have received from the other properties according to the provisions of the foregoing paragraph.

Section 735 When the mortgagee intends to enforce the mortgage against the transferee of a mortgaged property, the transferee must be served with a written notice one month before the enforcement of the mortgage.

CHAPTER V

RIGHTS AND DUTIES OF THE TRANSFEREE OF A MORTGAGED PROPERTY

 

Section 736 The transferee of a mortgaged property may remove the mortgage, provided that he is not the principal debtor, a surety, or an heir of either of them.

Section 737 The transferee may remove the mortgage at any time, but if he has been notified by the mortgagee of the mortgagee’s intention to enforce the mortgage, he must do so within one month thereafter.

Section 738 The transferee who wishes to remove the mortgage must notify the principal debtor and make an offer to every registered creditor, whether by way of mortgage or otherwise, to pay a reasonable amount corresponding to the value of the property. The offer shall contain the following particulars:

1. The place and description of the mortgaged property.
2. The date of transfer of ownership.
3. The name of the former owner.
4. The name and domicile of the transferee.
5. The sum offered.
6. A calculation of the total amount due to each of the creditors, including accessories, and the sum which would be distributed to them according to their respective ranks.

A certified copy of the entries in the official register of the mortgaged property shall be enclosed.

Section 739 If any creditor refuses the offer, he must file an action in Court within one month from the date of the offer for a judgment ordering the mortgaged property to be sold by public auction, provided that:

1. He advances the cost of sale;
2. He binds himself to make a bid or have a bid made above the sum offered by the transferee; and
3. He notifies his refusal to the transferee, other registered creditors, the former owner, and the principal debtor.

Section 740 If the net proceeds of the auction are more than the sum offered by the transferee, the costs of the auction shall be borne by him; otherwise, the creditor demanding the sale shall bear the costs of the auction.

Section 741 When all the creditors have accepted the offer, either expressly or implicitly, the mortgage and preferential rights are removed by the transferee paying or depositing in lieu of performance the sum offered.

Section 742 When, by the enforcement or removal of the mortgage, a person who has previously acquired the mortgaged property is deprived of the property, such deprivation has no retrospective effect, and the preferential rights registered by his own creditors of the mortgagor or other former owner remain unaffected. In such a case, if any rights over the mortgaged property existing in favor of or against the person who has previously acquired the mortgaged property have been extinguished by merger at the time of his acquisition, they shall revive in his favor or against him after he has been deprived of the mortgaged property.

Section 743 The transferee is liable for damages if the property has been made less valuable by his act or negligence, resulting in a loss suffered by the creditors having mortgages or preferential rights over the same. The transferee cannot, however, claim any sum spent by him or reimbursement of his expenses for improvements, except to the extent that he has increased the value of the property, and only up to the amount of the increase in value at the time of the auction.

CHAPTER VI

EXTINCTION OF MORTGAGE

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Section 744 A mortgage is extinguished:

1. By the extinction of the obligation secured, other than by prescription.
2. By the release of the mortgage granted in writing to the mortgagor.
3. By the discharge of the mortgagor.
4. By the removal of the mortgage.
5. By the sale of the mortgaged property by order of the Court as a result of enforcement or removal of the mortgage.
6. By foreclosure of the mortgage.

Section 745 The mortgagee may enforce the mortgage even after the obligation secured has been barred by prescription, but arrears of interest on the mortgage cannot be enforced for more than five years.

Section 746 Any performance, either wholly or partly, or any extinction, or any agreement modifying the mortgage or the obligation secured, must be registered by the competent official on the request of the interested party, failing which it cannot be set up against a third person.

 

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