Some parts of Indonesia, and Jakarta in particular, have again went into a lockdown as of mid-September 2020 as a result of COVID-19. Although the lockdown is scheduled to only last for two weeks, yet additional lockdowns may be necessary. Either way: with or without social distancing, meeting in person has become much more difficult. Many key decision makers work from home and prefer to not meet others in person in face of the risk of getting infected. This raises the question on what the formal requirements are for closing a deal in Indonesia and, in particular whether contracts and other important legal documents must be signed in order to be valid.
No signature required for agreements
Generally speaking, there is no form requirement for most contracts under Indonesian law. What matters is that the contracting parties reached terms (offer and according acceptance), which can be orally, electronically (e-mail, etc.) or on paper. As such, whether a contract is signed or not has no consequence for the legal validity of the contract.
It follows from this that a contract which the parties agree upon is valid irrespective of whether it is:
- signed with wet ink;
- signed electronically or in any other way; or
- not signed at all.
However, it is useful for evidentiary purposes to sign a document. Signing a contract also often signifies to the contracting parties that they now have truly agreed – even if legally, such agreement has already taken place before. For these reasons, the importance of a signature, as well as the contracting parties’ desire to place their signature should not be underestimated.
This obviously raises the questions what options the parties have when wet ink is not possible:
Alternatives scanned hand signature and e-signature
If the parties wish to sign a contract, yet wet ink is not an option, the two alternatives are (i) the scanned hand signature and an e-signature.
Electronic signatures are generally valid
Electronic signatures are generally valid and acceptable in Indonesia. Indonesian law differentiates between two types of electronic signatures, certified and uncertified. The only difference between those two types is the evidentiary value: some legal practitioners take the position that a certified e-signature has the same evidentiary value as an authentic deed.
Scanned hand signature ≠ e-signature
When signing in person is not possible, it is common to place one’s scanned signature onto the contract. It is a very common misconception that such scanned signature is the equivalent of an e-signature. Although colloquially, this may be how a scanned signature is referred to, there is an important differentiation between those two types legally:
An e-signature is a signature created from electronic data produced by configured hardware or software. The e-signature is made from personal, biometric, cryptographic or other codes, which makes it unique from person to person.
In terms of its purpose, there is no difference between a hand signature and an e-signature. You would ordinarily receive the document signed by hand with a message from the sender. With an e-signature, his message can be verified and authenticated as being sent by the e-signature signatory. It also ensures the integrity and originality of the message and it ensures that the message is unaltered.
Uncertified e-signatures may mean trouble in court
For as long as there are no disputes, none of the above matters. The question whether a contract was validly entered into will only arise as a dispute emerges and one party takes the view that the contractual documents were not validly agreed upon. This is where uncertified electronic signatures have a considerable disadvantage:
For electronic signatures, the party basing its claim on the validity of the contract must show that the electronic signature solution can provide electronic records that are admissible as evidence to support the existence, authenticity and valid acceptance of a signed document.
This is easy to show for a certified electronic signature. The Ministry of Communication and Informatics (“MOCI”) has certified three private Indonesian electronic signature providers, in particular. Each of the three providers has his own website with additional information how the registration of an electronic certified signature works.
Uncertified e-signatures, however, are like the “I agree” or “I accept” button one presses when subscribing to a newsletter. It would require digital forensics to use such e-signature in court proceedings.
Wet signature absolutely required in several instances
Although electronic signatures are generally permissible, wet signatures are required in several instances. This includes:
- many corporate documents (e.g. shareholder resolutions which must be in the form of a notarial deed);
- notarial deeds (e.g. deed of sale and purchase, inheritance statement, power of attorney to sell ); and
- real property transfer contracts and deeds
Using an electronic signature when a wet signature is required in practice by government agencies, courts and other stakeholders, such as notaries, could result in that document not being accepted as a valid document. This can have serious legal implications.
Recently, some notaries have started accepting electronic signatures in light of the rules on social distancing in Indonesia. However, in our experience, despite the clear law and despite the restrictions on social distancing, Indonesian courts – even those based in DKI Jakarta – are still quite reluctant to accept e-signatures (both certified and uncertified). They still want to see documents with handwritten signatures. The same holds true for most Indonesian government agencies.
E-signatures in international dispute resolution
In an international contract (the parties are from different countries), the venue of dispute resolution is often arbitration – as opposed to an Indonesian court. The applicable arbitration law and arbitration rules depend on what the parties agree upon. It is thus not possible to make a general statement other than that arbitral tribunals will generally have regard to the commercial agreement behind the contract. Arbitral Tribunal are thus, on average, much more lenient than local courts when it comes to e-signatures.
However, arbitral tribunals do not stand above the law. They must decide in accordance with the law. Not all countries allow for e-signatures and if an arbitral tribunal has to apply the law of a country in which e-signatures are not allowed, in the very worst case this could mean that a contract you thought you validly entered into is invalid.
Our advice: stick to the wet signature or put your scanned signature on the document
We highly recommend that you sign important documents with your wet signature or that you put your scanned signature onto a softcopy document. As noted above, the validity of a document will not change, the signature only serves evidentiary purposes.
Although COVID-19 has made personal contact difficult, authorities and courts in Indonesia still have a strong preference for wet signatures. It certainly is more “modern” to only work electronically and it also saves trees, but there is no apparent advantage to using an electronic signature, while the risks both in domestic and international proceedings are significant. Sometimes, being old-fashioned can be an advantage!
Further information and advice: write to us
At least to some extent, life must go on and this includes entering into agreements. You have no choice but to move forward somehow. If you have any questions on how you should enter into your agreements or are involved in a dispute where the validity of a signature could be challenged, do not hesitate to reach out to us for our support. We have extensive experience in both domestic and international dispute resolution and we have consistently achieved optimal results for our clients. Write an email to us at firstname.lastname@example.org to obtain more information.