Clauses are: understanding, type, and function in Indonesian law

Have you ever found the term “clause” when reading a work contract, lease agreement or other business agreement? Although sounding foreign to some people, the clause is a crucial part of every contract and agreement because it contains binding power that directly determines the rights and obligations of the parties involved.

Then, what exactly is meant by clause? Why is the clause an important part of legal practice in Indonesia? This article will discuss comprehensively about the understanding of clauses, various types, and their functions in agreements and examples of their application.

Also read: Can probation be extended? Indonesian Labor Legal Guidelines

Understanding of clauses in law

In legal practice, clause is an important element that forms the basis of each contract and agreement. In general, clauses are a phrase or legal sentence that contains provisions regarding rights, obligations, conditions, procedures for implementation, to the legal consequences for the parties involved.

These clauses are arranged in writing and become an integral part of legal documents, such as contracts or agreements that function as the main reference in upholding and protecting the rights of the parties involved.

Each agreement basically consists of a collection of interrelated clauses, forming a legal structure that is binding and adjusted to the needs and context of the intended legal relationship.

Also read: Mut’ah marriage is: understanding, law, and Islamic perspective

Types of clauses in contracts and agreements

Based on the civil law doctrine, there are several types of clauses contained in the contract and agreement, including:

1. Based on its nature and function
   1. The main clause, which is a compulsory clause so that a contract is valid and can be implemented, such as the identity of the parties, the object of the agreement, the price and time period.
   2. Ordinary clauses, namely clauses that are legally considered inherent in certain types of contracts, although not listed explicitly, such as default clauses, compensation and cancellation.
   3. Additional clauses, namely clauses that are specifically added by the parties to regulate certain matters outside of basic provisions, such as clauses Force MajeureArbitration clauses, confidentiality clauses, penalty clauses and clauses of responsibility restrictions.

2. Based on the shape and source
   1. Standard clause, namely every rule or conditions and conditions that have been prepared and determined in advance unilaterally by business actors as outlined in a document and/or agreement that is binding and must be fulfilled by the consumer

3. Based on the substance and purpose
   1. Exoneration clause, which is a clause that frees or limits the responsibility of one party for certain losses. This clause is often found in a standard agreement, but its use is limited and prohibited in consumer agreements if it is contrary to Article 18 of the Consumer Protection Act
   2. Arbitration clause, which is a clause that stipulates that dispute resolution between the parties will be carried out through arbitration, not a general court. This clause is part of an additional and valid clause as long as it is agreed upon by the parties

Also read: Sample house contract agreement letter

The function of the clause in the contract and agreement

In a contract and agreement, the clause functions as a foundation that regulates the overall legal relationship between the parties involved. A collection of clauses in a contract usually acts as a reference frame that accommodates and balances the interests of the parties.

The clause was prepared to explicitly regulate the rights and obligations of the parties, so as to prevent multiple interpretations that could cause disputes in the future. Which with this clarity, the clause also provides legal certainty, especially in terms of risk regulation and the determination of sanctions in the event of a violation.

Thus, the clause is a dynamic foundation in a contract. The clause not only sets specific and agreed upon rules, but also provides a flexible framework, ensures that legal relations between parties run stable, structured, and have certainty.

Also read: Un certified land? Fast Create a Physical Statement for Land!

Examples of the application of clauses in various types of contracts

Examples of the application of clauses in various types of contracts are as follows:

1. Buying and selling contract
   1. Basic clause (payment clause)
      “Payment is made in stages in three terms, with the first term paid when signing the contract”
   2. Additional clause (exoneration clause)
      “The seller is not responsible for the damage or loss of goods that occur after the goods are submitted and well received by the buyer, unless the damage is caused by the seller’s negligence before the handover process.”

2. Business contract or cooperation
   1. Main Clause (Capital Contribution Clause)
      “The first party will make a capital contribution of Rp500,000,000.00 (five hundred million rupiah) in the form of cash that will be deposited to the business account no later than 30 (thirty) calendar days from the date of signing this contract.”
   2. Additional clause (arbitration clause)
      “Every dispute arising from this contract will be resolved first through deliberations. If no agreement is reached, it is resolved through arbitration in Jakarta.”

Also read: 9 Things That must be in the Content of the Work Contract

Legal risks due to unauthorized or unclear clauses

Unauthorized or unclear clauses in a contract and agreement has the potential to raise a variety of significant legal risks. These risks can affect the contract of contract and trigger disputes between the parties.

One of the main risks of invalid or unclear clauses in the contract and the agreement is the cancellation of the law by law. This happens if the clause listed is contrary to the objective requirements of the agreement, such as objects that are not halal or causes that are not allowed. In this condition, the clause is considered to have never existed from the beginning, and as a result the entire contract becomes no legally valid.

Other legal risks arise when a clause is born from the non -fulfillment of the subjective requirements of the agreement, namely “agreement” and “skills”. If the agreement occurs due to coercion, fraud, or error, then the agreement or clause listed in it can be asked for cancellation by the disadvantaged party. This cancellation must be submitted through a legal process to cancel the validity of the clause or contract.

In addition to the two risks above, unauthorized or unclear clauses have the potential to cause disputes and disputes in the future. When it comes to the time for the contract, each party tends to interpret the clause in accordance with its own interests. This difference in interpretation often leads to conflict and deadlock in the implementation of the rights and obligations of the parties.

Also read: Compensation in civil law: type, legal basis, and case example

Perqara has served more than 27,700 legal consultations

For legal issues related to civil, Perqara has handled more than 7,000 cases. There are hundreds of perqara advocate partners with special expertise in each of their fields such as employment, marriage and divorce, land, and many more. Thus, clients can consult other legal issues in accordance with the problems being experienced.

Online Legal Consultation in Perqara

If you have legal problems related to this problem, you can chat directly with professional advocates for free only in Perqara. Download the Perqara application now and get a free legal consultation to get the right legal solution anytime and anywhere.

Need help for the establishment of PT, CV, or Foundation?

In addition to providing information about the world of business law, Perqara also provides professional assistance services for the establishment of PT, CV, and Foundations legally and trusted. We are ready to help you start the first step in building a business entity with an easy, fast, and transparent process. Use the assistance service for the establishment of a business entity in Perqara now and get a free website and logo for your business!

Also read: Legal Opinion: Definition, Function, Structure, and How to Prepare

(This article has been edited by the perqara editorial team)

Legal basis

1. Civil Code Book
2. Law Number 8 of 1999 concerning Consumer Protection

Reference

1. Oliven Huqmi Adhelia, “Standard Agreement According to the Perspective of Employers, Consumers, and Legal Certainty in the Consumer Protection Act”, UNES Legal ReviewVol. 5, No. 4, (2023).