In the procurement of goods and services in Indonesia, timely delivery is an important consideration alongside the quality and price of the goods. Delayed delivery of goods can disrupt production processes, construction projects, inventory management, and may result in losses for the buyer.
For companies that rely heavily on suppliers, delayed delivery is not merely an operational issue. It may also give rise to legal issues, particularly when the supplier fails to fulfill its delivery obligations within the timeframe agreed upon in the contract.
So, who is responsible for losses arising from delayed delivery? The answer is not always the supplier. Liability must be determined by considering the contractual provisions, the cause of the delay, the parties’ respective fault or negligence, and the losses that can be proven.
The Role of Contracts in the Procurement of Goods and Services
In the relationship between a buyer and a supplier, the contract serves as one of the primary bases for determining the parties’ rights, obligations, and allocation of liability.
Article 1338 of the Indonesian Civil Code (KUHPerdata) essentially provides that a legally valid agreement shall bind the parties as law. Therefore, provisions agreed upon in a procurement contract, including delivery schedules, deadlines, payment mechanisms, and consequences of delay, must generally be complied with by the parties.
Accordingly, a clear procurement contract is essential for determining the appropriate course of action when a delay or breach of obligation occurs. The clearer the provisions concerning the parties’ rights and obligations, the lower the risk of differences in interpretation and disputes.
Who Is Responsible for Delayed Delivery?
Before determining which party should bear the losses, it is necessary to first identify the cause of the delayed delivery. In procurement transactions, delays may occur under several circumstances:
- Delay Caused by the Buyer
A supplier is not necessarily responsible for a delay when the delay is caused by the buyer.
Examples include delayed payment of the down payment (DP), delays in approving samples or specifications, or changes to the design or specifications during the production process.
If, under the contract, such actions result in a delay to the production or delivery schedule, the buyer may be responsible for the resulting consequences.
- Delay Caused by the Supplier
If the supplier is late in producing the goods or fails to deliver the goods to the carrier within the agreed timeframe, such conduct may constitute default (wanprestasi) if the applicable contractual and legal requirements are satisfied.
In such circumstances, the supplier may be required to bear the consequences agreed upon in the contract, including late-delivery penalties (liquidated damages) or compensation for losses, provided that there is an appropriate legal and contractual basis and the losses can be proven.
Therefore, buyers should carefully review provisions concerning the delivery date, late delivery, penalties, liquidated damages, and available remedies in the procurement contract.
- Delay Caused by a Courier or Logistics Provider
A delay may also occur after the supplier has handed over the goods to a courier, logistics company, or other carrier.
If the supplier can prove that the goods were handed over to the carrier on time and in accordance with its contractual obligations, it is necessary to further examine which party bears the risk during transportation under the applicable contract.
Accordingly, liability cannot automatically be attributed to either the supplier or the logistics provider without examining the relevant agreements, proof of delivery, shipping receipts, and provisions concerning the allocation of transportation risks.
- Delay Due to Force Majeure
A delay may have different legal consequences when it is caused by a force majeure event, such as a natural disaster, war, or another circumstance beyond the parties’ control that satisfies the force majeure provisions stipulated in the contract.
In such circumstances, the supplier may be entitled to an exemption from or limitation of liability for the delay if the requirements for force majeure under the contract and applicable Indonesian law are satisfied.
However, force majeure should not automatically be considered a complete exemption from liability. It is necessary to examine whether the event actually falls within the contractual definition of force majeure, whether the supplier has taken reasonable measures to mitigate its impact, and whether the required notice obligations have been fulfilled.
What Clauses Should Be Included in a Procurement Contract?
To minimize the risk of disputes arising from delayed delivery of goods, a procurement contract should clearly regulate:
- The delivery schedule and deadline;
- Goods specifications and acceptance standards;
- The rights and obligations of the buyer and supplier;
- Late-delivery penalties or liquidated damages;
- Force majeure provisions;
- The notification and delay-management mechanism;
- Allocation of risk during transportation; and
- Dispute resolution mechanisms.
Clear contractual provisions help buyers and suppliers understand who is responsible, what losses may be claimed, and what actions may be taken when a delivery delay occurs.
Who bears the losses arising from delayed delivery of goods? There is no single answer applicable to every transaction. The liability of the buyer or supplier depends on the contract, the cause of the delay, the allocation of risk, the parties’ fault or negligence, and the losses that can be proven.
Therefore, companies should conduct a contract review before entering into a procurement agreement and promptly undertake a legal assessment when a delivery delay occurs. These steps can help companies understand their rights and obligations and determine the appropriate legal remedies.
Schinder Law Firm can assist companies in managing legal risks relating to the procurement of goods and services and supplier relationships, including drafting and reviewing procurement/supply agreements, providing legal opinions on default, preparing legal notices (somasi), contract negotiation, and dispute resolution. For further information regarding legal services related to procurement, supply agreements, and dispute resolution, contact Schinder Law Firm at info@schinderlawfirm.com.
Author:
Budhi Satya Makmur