You may claim actual damages (kerugian nyata), loss of expected profits (keuntungan yang hilang), and legal costs. These must be clearly proven and causally linked to the breach.
A contract creates certainty. It reflects trust, performance, and legal commitment between two or more parties. But when one party breaks that trust—whether by failing to deliver, delaying performance, or not acting in good faith—it becomes what we legally call a breach of contract in Indonesia.
In this article, we will guide you step-by-step through the meaning, consequences, and legal remedies of a breach of contract under Indonesian law. Whether you’re a foreign investor, a business owner, or a legal enthusiast, this article will help you navigate the issue confidently and lawfully.
Put simply, a breach of contract in Indonesia occurs when one party fails to perform their legal obligations as stated in a valid agreement. This breach may involve:
The breach could be intentional or accidental. However, under Indonesian law, the consequence is the same: the non-breaching party is entitled to legal remedies, including compensation for losses suffered.
In today’s commercial landscape, understanding the risks associated with a breach of contract in Indonesia is not optional—it’s essential. Businesses rely on contracts for everything: partnerships, sales, services, joint ventures, and investments.
When a contract is breached, the ripple effects can be severe: operational disruption, financial loss, reputation damage, and even litigation. Hence, knowing how to respond promptly and correctly can save your business from prolonged disputes and expensive court proceedings.
The primary source of contract law in Indonesia is the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata or KUHPerdata), especially Book III on Obligations. Several key articles are worth noting:
In addition to the Civil Code, if the contract involves electronic signatures or online transactions, the Law No. 1 of 2024 on Electronic Information and Transactions (ITE Law) may also apply.
Before enforcing a contract, ensure it’s valid under Indonesian law. As per Article 1320 KUHPerdata, a contract is valid if it includes:
Without these four elements, a contract may be void or voidable, and enforcement—especially for breach of contract in Indonesia—could be legally challenged.
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There are different types of breaches, each with specific legal implications:
1. Material Breach
A fundamental failure that defeats the purpose of the contract. Example: Failure to deliver critical components.
2. Minor Breach
A slight deviation from agreed terms, such as delayed delivery with minimal impact.
3. Anticipatory Breach
When one party declares in advance that they will not fulfill the contract.
4. Actual Breach
An outright refusal or failure to perform the obligation at the agreed time.
Recognizing the type of breach of contract in Indonesia is crucial to determine what legal action to take.
Dealing with a breach effectively involves both legal and strategic steps. Here’s what you should do:
Remember, timing is critical. Acting swiftly can prevent additional damages and improve your chances of recovery.
Kusuma & Partners assist businesses in handling Litigation & Dispute Resolution, ensuring your legal interests while complying with all legal requirements.
The Indonesian Civil Code provides various remedies when a contract is breached:
1. Specific Performance
The court can compel the breaching party to fulfill their contractual obligation.
2. Compensation (Ganti Rugi)
Based on Article 1243 KUHPerdata, damages may cover material and immaterial losses.
3. Contract Termination
If the breach is serious, the innocent party may legally end the contract.
4. Interest or Penalties
If the contract includes penalty clauses or late interest, these may be enforced.
5. Force Majeure Defense
If the breach is due to force majeure (e.g., natural disaster), liability may be waived—if validly stipulated in the contract.
Each case is different. Choosing the right remedy depends on the type of breach of contract in Indonesia and the evidence you have.
In Indonesia, sending a Somasi is a common first step in handling a contractual dispute. This letter:
A Somasi typically gives a deadline of 7–14 days. If the breaching party ignores it, litigation or arbitration can proceed.
Litigation
Handled by District Courts and governed by the Indonesian Civil Procedure Code. It’s suitable for complex cases but can be time-consuming.
Arbitration
Governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution. It is faster, private, and enforceable both domestically and internationally.
Some contracts include a BANI (Badan Arbitrase Nasional Indonesia) clause, which requires disputes to be resolved through arbitration.
Whether arbitration or court litigation is better depends on the nature of the breach, the evidence, and the dispute resolution clause in your contract.
Kusuma & Partners assist businesses in handling Commercial Litigation as well as Arbitration matters, ensuring your legal interests while complying with all legal requirements.
Solid evidence is the foundation of any successful claim. You will need:
Without adequate proof, courts or arbitrators may dismiss your breach of contract in Indonesia claim.
Avoiding a breach is better than solving one. To reduce risks:
Prevention isn’t just good practice—it’s cheaper, faster, and protects business relationships.
You should consider hiring a lawyer when:
At Kusuma & Partners Law Firm, our experienced lawyers will guide you through negotiations, mediation, arbitration, or litigation—whatever path suits your business best.
Handling a breach of contract in Indonesia isn’t just about reading the law—it’s about making the right decisions at the right time. With clear contracts, strong evidence, and experienced legal support, your business can bounce back from any contract dispute stronger and more resilient.
Need expert help to resolve a contract dispute or draft agreements? Contact Kusuma & Partners Law Firm today. Let’s protect your business together.
“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult us.”
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