How Contracts Can Waive Statutory Laws

If you have dealt with contracts governed under Indonesian law, chances are you would also have read a provision that waives Article 1266 (sometimes with Article 1267) of the Indonesian Civil Code (“ICC”).

Ask young (or even senior) Indonesian lawyers what the waiver means, and most will give you this generic response: the provision waives the requirement to obtain court approval to terminate the relevant contract. The response is not wrong; Articles 1266 and 1267 do in essence require termination of reciprocal contracts due to default to be decided by a court.[1]

But have you ever considered how is it possible that Articles of a statutory law (like the ICC) be waived by a “mere” contract? If that is the case, can the same waiver be done to any other provisions of statutory laws? say for example, a sale and purchase contract states that the parties agree to waive Article 372 of the Indonesian Criminal Code so that neither party can be criminally charged of embezzlement. Setting aside that it is almost impossible that any parties to a contract would dare make such a provision, what do you think would happen in such hypothetical case? Would the waiver work?

As it turns out, contracts can in fact waive certain, but not all statutory provisions.  Legal theories recognized in Indonesia distinguishes two kinds of statutory provision: those of “imperative law” (dwingendrechtin Dutch or kaidah hukum yang memaksa in Indonesia) and those of “facultative law” (aanvullendrechtin Dutch or kaidah hukum yang mengatur in Indonesia).[2]  Imperative laws are those sets of law that may not be deviated and must be complied at all times. Public law, such as the criminal law are by nature an imperative law.[3] Conversely, facultative laws are those sets of law that are complementary in nature, may be deviated, and would take effect only if the parties do not agree otherwise.[4]Contracts may waive statutory provisions categorized as facultative law, but may not waive imperative laws.

It can be concluded almost absolutely then, that contracts cannot waive the article criminalizing embezzlement, as it qualifies as an imperative law. The debate gets a bit murky though, when dealing with articles in the ICC, or those statutory provisions that concerns private or civil law. Legal scholars (and jurisprudences) could agree that the civil law (including the ICC)is made up of a mixture of imperative and facultative laws[5] but have not definitively agree which is which.

At least, provisions of the ICC that govern fundamental principles are considered to be imperative laws. This include, Article 1320 of the ICC that states the elements of a contract (which by the way, are consent, capacity, certain object, and lawful purposes) and Article 1338 of the ICC codifying the pactasuntservanda and freedom of contract principles. But differences of view seem to occur when dealing with a more detailed and operative provision in the ICC, like its Articles 1266 and 1267.

The majority of lawyers reviewing a contract would not care less of whether Article 1266 and 1267 of the ICC could be waived or not, simply because such kind of waiver is extremely commonplace and feels like a natural thing to do. But in fact, there are still diverse views on the waiver’s legality; For example, GunawanWidjaja,[6]KartiniMuljadi,[7] and HardijanRusli, SH[8]argue that Articles 1266 and 1267 of the ICC are in fact imperative laws and cannot be waived. R. Setiawan, SH[9]along with some jurisprudences by Indonesian judiciary bodies took the stance that waiver to Articles 1266 and 1267 is an acceptable action.

In light of diverse and unclear views related to which statutory provisions of the private law that could be waived or not by a contract, what would be the appropriate course of action? The writer argues that it would still be fine to put in waivers (including, to put in waiver to Articles 1266 of 1267 of the ICC) of private law-related statutory provisions in a contract, but always couple them with a severability clause (a clause stating that the invalidity of one clause does not cause invalidate the whole agreement). If during the performance of a contract, no issue was to arise among the contracting parties, then debates as to the validity of the waivers would not occur in the first place. If in the unwanted event where dispute do arise and the validity of the waivers be challenged, any determination of invalidity of such waiver would not affect/invalidate the whole agreement.

Theodore M. Amarendra

DISCLAIMER

This article is intended strictly informational purposes. It is not intended as a legal advice or to solicit any business. You should not take, or refrain from taking, any legal action based upon the information contained in this article without first seeking professional counsel.

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[1]For full text:

Article 1266

A termination condition is deemed to have been included in reciprocal agreements, in case a party does not fulfill his obligation.

In such case, the agreement is not null and void, but termination must be requested to the Court.

The request must also be made, even though the conditions of termination concerning the nonfulfillment of an obligation is included in the agreement.

If a termination condition is not included in an agreement, then the judge, considering the situation, upon the defendant’s request, hasthe discretion to fix a timeframe to fulfill such obligations, but such timeframe may not exceed one month.

Article 1267

The party against whom the obligation is not fulfilled may opt to compel the counterparty to fulfill the agreement where such fulfillment is still possible, or demand the termination of such agreement, with compensation of costs, damages and interests.

(unofficial English translation)

[2]Dr. Soedjono Dirdjosisworo, SH, Pengantar Ilmu Hukum (Jakarta: PT Rajagrafindo Persada, 2008), p. 201-204.

[3]Ibid.

[4]Ibid.

[5]Ibid.

[6]Gunawan Widjaja, Memahami Prinsip Keterbukaan (Aanvullend Recht) dalam Hukum Perdata (Jakarta: PT Rajagrafindo Persada, 2006), p. 398-399

[7]Gunawan Widjaja & Kartini Muljadi, Seri Hukum Perikatan: Hapusnya Perikatan (Jakarta: PT Rajagrafindo Persada, 2003), p. 204-205

[8]Hardijan Rusli, SH, Hukum Perjanjian Indonesia dan Common Law (Jakarta: Pustaka Sinar Harapan, 1992), p. 126

[9]R. Setiawa, SH, Pokok-Pokok Hukum Perikatan (Bandung: Percetakan Binacipta, 1987), p. 66