Contract Performance During Covid19 Pandemic

Apr 13, 2021

It is important that an agreement that has been made and entered between two or more parties is binding and must be adhered to by the parties involve. This is clearly stipulated under article 1338 of the Indonesian Civil Code (“Civil Code”). Prof. Subekti is a reputable person in this field of law reiterate this part in the prevailing laws hereto and has written elaborate elucidation and commentary on Agreement Law.

Force Majeure

There are however certain event that may cause the parties either individually or jointly to not fulfil certain stipulations or the overall contract itself due to event beyond the power of the individual that are party to the agreement, for which the parties there to can be held to be blameless.  The reasons are among others extraordinary event, blamelessness, unintentional act, and the non-existent of bad faith. Conditions of beyond power includes compulsion, compelling conditions overwhelming constrain, and also coercive pressure.

In the event of force majeure, can be separated into an absolute condition, for which nothing further can be done due to total destruction or to a relative condition where the problem can somehow be resolve and the agreement can be sustained.

COVID19 Pandemic is an relative Force Majeure

We are all aware that Covid19 has caused serious damages to the overall functioning of the economy. Many business have suffered under extreme conditions mentioned above. Edy Lisdiyono has written on hukumonline.com that Covid19 can be considered as relative force majeure, for which the constrains are temporary, for which one or the other party can continue to fulfil the agreement. President Joko Widodo has issued Presidential Decree No.12/2020 determining Covid19 as a National Disaster. For which this can be used as an instrument to alleviate pressure constrains on the implementation of existing business contract.

An important example of business contract that requires alleviation from bankruptcy are the agreement of the Hotel and Tourism Industry with the financial banking institutions involving loans, as we all know tourism is not functioning and financial renegotiation and rescheduling is important to support relevant parties. The Financial Services Authority have in the meantime issued relevant regulations there to which is Financial Services Authority Regulation No. 48/POJK.03/2020 on the Amendment of Financial Services Authority Regulation No. 11/POJK.03/2020 regarding National Economic Stimulus As a Countercyclical Policy on the Impact of Spread of Covid19. 

To implement renegotiation between the debtor and the lender, it is important to conduct key steps as follows:

1. To have in-depth advice from relevant professional consultants such as legal consultants as well as financial and tax consultants.

2. Announce the plans to other relevant parties and therefore demonstrate continued acts of good faith as well as fulfil stipulations as mentioned

        in the contract as mentioned in article 1320 jo. 1338 Civil Code.

3. Fulfilment of all amendments made in the renegotiated contracts.

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For further information regarding the above article, please contact Mr. Aldi Andhika Jusuf at [email protected], Sdri. Nadia Maulida at [email protected], Br. Rico Ricardo at [email protected]

(The above is an article and cannot be considered as legal advice or opinion from the author and / or K&K Advocates law office).

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Source:

•  Rahmat SS Soemadipradja “Legal Explanation on Coercive Circumstances (Terms of Agreement due to force majeure)” 

•  Prof. Subject “Agreement Law”

•  J. Satrio “Laws of Engagement, Engagement in general”

•  Hukumonline.com “The Consequences of Force Majeur Law in the View of Civil Law Experts

•  It must be seen whether the force majeure is absolute or relative. Renegotiating contracts is a common option ”.

  (https://www.hukumonline.com/berita/baca/lt5ea3ac716afa1/akibat-hukum-iforce-majeur-i-dalam-pandangan-pakar-hukum-perdata?page=all)

Contributing Advisors