Loan Agreement Executed Through Unauthorized Representation: Liability of the Named Borrower
A bank manager of Mankong Bank Co., Ltd. sought to obtain a personal loan in violation of internal regulations prohibiting employees from borrowing funds for personal use. To circumvent this restriction, Mr. Lueang arranged for Mr. Khiao, a merchant, to act as the nominal borrower under a loan agreement of 100,000 baht.
Despite a private understanding that Mr. Khiao would not be bound by the loan, he formally executed the agreement as borrower, while Mr. Lueang signed on behalf of the bank as its authorized representative and received the funds. Upon default, Mr. Lueang absconded.
Legal Issue:
Can the bank enforce the loan agreement against Mr. Khiao?
Analysis:
Under Thai law, contractual liability is determined by outward expression of intent rather than undisclosed internal intentions. Mr. Khiao, having signed as borrower, is prima facie bound by the agreement. Even if both parties internally agreed otherwise, such intent is irrelevant to third-party enforceability.
Furthermore, although Mr. Lueang acted beyond his authority, his knowledge and conduct may still be imputed to the bank as a juristic person.
Conclusion:
The bank is entitled to enforce the loan agreement against Mr. Khiao, who remains legally liable as the named borrower