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The Legal Aspect of Electronic Agreements in Indonesia

Contracts have been a staple in most business and commercial activities. Recently, an electronic agreement has become the most preferable form of contract for foreign investors for investment in Indonesia. The law in Indonesia covers the use of electronic agreements. The electronic agreement or electronic contract is defined in Article 1 Number 17 of Law no. 11 of 2008 concerning Information and Electronic Transactions (EIT Law) as an agreement between the parties made through an electronic system. Electronic agreements are made when carrying out electronic transactions or other legal actions by way of electronic media. Examples of electronic agreements may include:

  1. Electronic contracts made through online platforms that are generally carried out on a website or application that sells goods or services, such as peer-to-peer lending.
  2. Electronic data interchange, which is usually carried out in electronic form, or contracts made by one company with another company in terms of exchanging transaction data that is carried out repeatedly.
  3. Clickwrap Agreement, where the contract is carried out with the agreement by the buyer to the terms made by the seller in trading through an electronic platform by clicking on a column that usually says, "I Agree" and the like.

In accordance with Article 18 paragraph (1) of the EIT Law, electronic transactions set forth in electronic contracts shall be binding on the parties involved. It shall also serve as valid evidence in court in accordance with the applicable procedural law in Indonesia.
The validity of an electronic agreement is not indifferent to agreements made in physical form. Agreements made in print and electronically, orally or in writing will be considered valid by law if they meet the requirements stipulated in Article 1320 of the Indonesian Civil Code. The four legal requirements of the agreement include:

  1. agreement of the parties
  2. the capabilities of the parties
  3. a specific object or a certain thing; and
  4. lawful cause

Moreover, the use of an electronic agreement has been regulated under the regulations in Indonesia. Article 46 paragraph (2) of the Government Regulation No. 71 of 2019 concerning Operations of Electronic System and Transactions (GR 71/2019) regulate the terms of an electronic agreement or electronic contract, which are:

  1. there is an agreement of the parties;
  2. carried out by a legal subject who is capable or authorized to represent in accordance with the provisions of the legislation;
  3. the specific object; and
  4. the object of the transaction must not conflict with the laws and regulations, decency and public order.

Additionally, electronic agreements addressed to Indonesian residents must be drafted in the Indonesian language. Under Article 47 paragraph (2) GR 71/2019, the electronic agreement or contract must also at least contain:

  1. The identity of the parties;
  2. objects and specifications;
  3. electronic transaction requirements;
  4. prices and fees;
  5. procedures in the event of cancellation by the parties;
  6. provisions that give the injured party the right to return the goods and/or request a replacement of the product if there is a hidden defect; and
  7. choice of law for electronic transaction settlement.

Therefore, based on the legal provisions provided above, electronic agreement or an electronic contract shall be considered valid if it fulfills the legal requirements and it has the same power as a conventional agreement in physical form. In order to avoid any misconception of an electronic agreement, it is advisable to have guidance from a corporate lawyer in Indonesia, especially a lawyer from a reputable corporate law firm in Indonesia.

How Schinder Can Help

Schinder Law Firm is a leading corporate law firm in Indonesia, practicing Indonesian company law and Indonesian investment law. Our team of corporate lawyers and investment lawyers has forged a reputation for assisting various clients across the globe. As Indonesian corporate lawyers, we have extensive experience providing daily legal services in various commercial contracts, including electronic agreements. If you have inquiries related to an electronic agreement, please feel free to send a message to info@schinderlawfrim.com.

Author: Budi Satya Makmur

Schinder Consultant London Ltd.


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