16 Dec 2023
From a legal perspective, contracts are a never-ending source of debate and analysis due to the inevitable legal consequences they carry. A contract is defined as “a promise or series of promises for the breach of which the law affords a remedy or the execution of which the law in some way recognizes as a responsibility,” according to the Black Law dictionary. A contract is defined under Indonesian law as “an agreement is an act pursuant to which one or more individuals commit themselves to one another” (Article 1313 of the Indonesia Civil Code). Furthermore, Article 1338 of the Civil Code states that ” All legally executed agreements shall bind the individuals who have concluded them by law. They cannot be revoked otherwise than by mutual agreement, or pursuant to reasons which are legally declared to be sufficient. They shall be executed in good faith“, that is to say, whoever is bound by a contract made lawfully will be bound by a binding regulation against it.
Typically, a contract has a clause or article regulating the termination of the contract. According to Article 1381 of the Civil Code, there are ten grounds for the termination of a contract, two of which are the expiration of time (for instance, when the parties explicitly state that the contract has terminated) or when the rights and obligations of the parties have been satisfied.
However, the contract may have already lapsed, but the parties are nonetheless willing to continue their involvement and fulfill their obligations under the contract as though it were still in effect and binding. The question then becomes, is the contract remain valid/enforceable to this extent?
The term “Tacit Contract” (re: perjanjian diam-diam) describes this situation. Instead of indicating “Silence is Agreed,” Tacit Contract refers to a situation in which the parties to an agreement do not have a legally binding written contract but yet carry out the actions they have committed to as though the agreement were still in effect. According to Article 1339 of the Indonesian Civil Code, “Agreements shall bind the parties not only to that which is expressly stipulated, but also to that which, pursuant to the nature of the agreements, shall be imposed by propriety, customs, or the law“. In addition, Article 1347 of the Indonesia Civil Code explained that “Customary stipulations shall be deemed to be implied in the agreement, notwithstanding that these have not been expressed“. The Author believes this means that even if the contract has ‘in fact’ terminated (per the written contract), if parties continue to perform the performance specified in the contract (as if the contract were still in effect), it is considered customary (tacit) under Article 1347 of the Civil Code. Even if a party to the previous contract fails to meet its obligations in accordance with the contract, despite the contract having terminated, the aggrieved party may still file a claim for the fulfillment of the obligation or damages under the contractual consent. This Tacit Contracts conduct implies that by ‘still’ performing the conduct as it was in the prior contract, the parties ‘remain’ acknowledge the contract continues in effect and ‘keep’ the contract’s inherent rights and obligations.
This instance is reflected in the final judgment (in kracht van gewijsde) No. 2178 K/Pdt/2009, between PT Dwi Damai as the Petitioner formerly Plaintiff, and PT Phillips Indonesia and PT Philip Electronic Singapore Pte Ltd as the Respondent formerly Defendants I and II/Appellants I and II. The panel of judges at the Supreme Court of the Republic of Indonesia acknowledged that, despite the contract’s expiration, the parties keep on carrying out the agreed-upon legal actions in good faith (geoder trouw, bona fide). In the case of legal action in the form of a custom, the parties have tacitly expressed their consent, and the principle of consensuality (see Article 1320 of the Civil Code) prevails with full force and effect (vide Article 1338 of the Civil Code).
However, the question arises as to which relative competence is competent to hear the case in the event of a dispute. Is the plaintiff filing a lawsuit at the defendant’s residence (actor sequitur forum rei), at the location of the object over an immovable object (rei sitae), or in court as stipulated in the contract (if the jurisdiction in the contract differs from that of the defendant’s residence)?
As aforementioned, as long as the parties still recognize the contract and so long as the rights/obligations in the contract are still fulfilled by the parties (even if the contract has expired and/or not been renewed), then other clauses, e.g. dispute resolution, should also persist to be implemented. Thus, the relative competence of the authorities in hearing this case corresponds to the relative competence agreed upon in the contract by the parties.