Force Majeure Agreement in Indonesia: How to Prepare It

How to Prepare a Force Majeure Agreement in Indonesia

  • InCorp Editorial Team
  • 9 November 2020
  • 3 minute reading time

The coronavirus crisis has disrupted global business and economy. And due to the lockdowns implemented by the Indonesian government, many businesses were forced to close their doors, thus impacting the performance of contracts and agreements.

So how can the defaulting party avoid liability as a result of this unanticipated event? And how can all other parties protect themselves from any suspension of contract? This is when force majeure comes into play. This article will elaborate on this concept for you.

What is a Force Majeure Agreement in Indonesia?

A force majeure agreement is a contract that will change all contractual parties’ rights and obligations under an agreement under an unprecedented event that is beyond the parties’ control.

As per Indonesian Law, a defaulting party is responsible for all losses, profits, and cost compensation for delayed performance or non-performance of legal responsibility under an agreement.

Failure to fulfill any legal obligation under a contract is considered unlawful unless the defaulting party can prove that such delayed performance or non-performance is brought forth by unforeseen circumstances.

In accordance with Indonesia Civil Code, a force majeure may exclude a defaulting party from liabilities when the said party meet these conditions: an unforeseen event or situation, a circumstance that is beyond the obligor’s control, the event is unavoidable by all parties, the obligor is not responsible for the event, an event or circumstance that prevents the obligor from fulfilling its responsibilities and obligations, the obligor has no intention to default, no ill intention or bad faith from the obligor, performing the obligation may be prohibited.

How to Prepare a Force Majeure Agreement in Indonesia

When preparing a force majeure agreement in Indonesia, both parties shall negotiate the components to be included in the clause.

Some of the important things to consider are shown below:

  • A detailed description of the cause of a force majeure situation

For an event like COVID-19, words such as “outbreak” or “pandemic” must appear in the clause to increase the chance to qualify the crisis as a force majeure case.

  • The aftermath or consequences of a force majeure event

All parties involved shall explain the impact on the contract if a force majeure event happens. For instance, will the event postpone or terminate the agreement, and who will be responsible for any loss or costs incurred due to the force majeure.

  • Things to do if a force majeure event occurs

One of the most important procedures is that the party that invokes the force majeure is responsible to inform the other party of the purpose with detailed descriptions of the obstacles.

  • Force majeure-invoking party shall prove the exhaustion of its necessary measures

To mitigate the damage as a result of a force majeure event, the proof of depletion of the measures is critical. This is also done to protect all parties.

How Cekindo can Assist

If you need a legal and professional force majeure agreement in Indonesia, Cekindo is the company that can fulfill your requirements.

We are a team of legal consultants specialised in drafting business contracts and agreements in both English and Indonesian languages for individuals and organisations in Indonesia.

Force majeure agreements and other business contracts drafting require considerable time, efforts, and immense experience. Your legal agreements have been highly accurate and our legal experts are well trained to assist you with that.

Cekindo maintains the best standards and high confidentiality throughout the entire drafting process. Let us help you prepare your force majeure agreement in Indonesia to make your work flawless and easier.

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Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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