As a businessperson, contracts are an everyday occurrence. Business people almost always conduct their activities through contracting.
However, there are still many business people who consider contracts as a formality and only see them as proof of agreement between the two parties in case of disputes and problems in the future, without really understanding the contents of the contract.
Most business people will understand the importance of the contract when a problem occurs. And when this condition occurs, the businessman will then look back at the contents of the contract and find the contents of the contract that turned out to be inappropriate or in favor of one party only.
So, before this happens to your business, know first how to make the right contract according to Indonesian law.
Contract Definition
Before we dive deeper into contracts, we first need to know the definition of a contract itself. Article 1313 of the Civil Code defines a contract as an act in which one or more people bind themselves to one or more people. Thus, we can conclude that a contract is the product of an agreement between the parties bound in it.
Furthermore, one of the principles applicable in contract law is the principle of freedom of contract, which is the principle that gives freedom to the parties in the contract to make, determine the content and form of the agreement (Article 1338 of the Civil Code).
Conditions of Contract Validity
The principle of freedom of contract does not necessarily make all agreements valid. Article 1320 of the Civil Code stipulates four conditions for a contract to be considered valid, namely:
- The agreement of those who bind themselves;
- Capacity to enter into an agreement;
- A specific subject matter;
- A cause that is not prohibited.
The first and second conditions are subjective conditions because they concern the parties making the agreement. If these conditions are not met, then the injured party can cancel the agreement. Meanwhile, the third and fourth conditions are called objective conditions because they relate to the content of the agreement. If not fulfilled, it can result in the contract or agreement being null and void.
Tips for Making Legally Correct Contracts
Well, now we know what a contract is and the legal requirements of a contract. Now, let’s look at some tips for creating a legally correct contract.
1. Pay attention to the format and legal terms of the contract
The Civil Code as the legal basis governing contracts in Indonesia does not specifically determine the standard format of a contract.
However, the contract must still fulfill the conditions that have been determined as Article 1320 of the Civil Code, so that the contract can be valid and binding on the parties.
2. Pay Attention to the Points in the Contract
Although Indonesia embraces the principle of freedom in making contracts, you still have to follow the norms and laws that apply. There are common points in contracts such as:
- Parties
- Introduction
- Definition
- Representations and Warranties
- Contract Content
- Price
- Payment Terms and Methods
- Payment obligations
- Time & Delivery
- Rights/title
- Liability & Indemnification
- Taxation
- Force majeure
- Period of validity of the agreement
- Default & Consequences of default
- Applicable Law
- Attachment
- Cover
3. Note Contracts that Need and Don’t Need to Use Notarial Deed
Not all agreements require a notarial deed. Notarial deeds are only mandatory for certain types of agreements.
Notaries make notarial deeds as legal documents to give more legal force to an agreement. One of the contracts that require a Notarial Deed is a land grant and sale and purchase agreement.
4. Avoid One-sided or Adverse Contracts
When you want to make a contract, make sure the contents of the contract accommodate the interests of the parties to the contract. In addition, avoid contract content that is one-sided and detrimental to one party.
By making the right contract, you will find it easy to run your business and avoid various business problems.
KH Contact
In making a contract, there are indeed challenges. Therefore, it never hurts to ask for help from experienced professionals, one of which is Contract Law.
Kontrak Hukum is a digital legal platform that can help you create contracts more easily and precisely. Starting from employment contracts, cooperation, investment, distribution, leasing, to events.
What are you waiting for? For more information, visit KH Services – Contract.
Jika masih ada pertanyaan, kamu juga bisa konsul gratis di Ask KH or send a direct message (DM) to Instagram @kontrakhukum.
In addition to getting help with agreement-making, you also have the opportunity to join the KH Business Community.
Get access to various information, discussions, and support from other business people.
Let’s be part of the KH Business Community!
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Or for KH friends who want to get additional income up to millions of rupiah, can also be part of the Legal Contract Affiliate Program.
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