Your vendor contracts are a liability, not a safety net.
Most vendor contracts are written to record intent, not to manage risk. When a supplier misses a delivery or a dispute surfaces, the document that was supposed to protect you becomes the first obstacle.
Every purchasing team has a version of the same story. A vendor misses a critical milestone, a delivery arrives out of spec, or a supplier simply goes quiet. Someone pulls out the contract and realises it was never written for this moment.
Contracts drafted to create the appearance of an agreement are common in Indonesia and across the region. They work while everyone is acting in good faith. They fail exactly when you need them.
A contract that only works in good faith is a letter of intent with a signature at the bottom.
1. Deadlines without consequences
The contract says what must be delivered and when, but says nothing about what happens if it's late. Without an explicit penalty clause (klausula denda) or a termination right tied to missed dates, lateness becomes a negotiation rather than a breach.
Fix it in the draft: a daily penalty for delay, a defined cure period, and an automatic right to terminate for material deadlines.
When it goes wrong: send a formal default notice (somasi). Pasal 1238 KUHPerdata frames default around such a notice. Note that the Supreme Court's SEMA No. 3/1963 treats Pasal 1238 as no longer binding in its strict form, so a claim can in principle be filed without one. Still, a written somasi remains standard practice: it fixes the date of default, documents good faith, and often settles the matter on its own.
Damages under Pasal 1243 KUHPerdata cover costs (biaya), losses (rugi) and interest or lost profit (bunga), each of which you must prove with documents. Force majeure (Pasal 1244–1245) is the vendor's usual defence, which is why its scope belongs in the contract, not in a later argument.
2. Ambiguous specification, disputed rejection
"Goods meeting the agreed specification" means little if the specification lives in a purchase order or drawing the contract never incorporates. The vendor argues the goods conform; you argue they don't; the contract is silent.
Fix it in the draft: put quality standards, tolerances and acceptance criteria in the contract body, incorporate every attachment by reference, and state who decides conformity and within how many days.
When a breach is clear, Pasal 1267 KUHPerdata lets the aggrieved party choose between demanding performance or terminating, in each case with damages. That choice is strategic and hard to reverse. Decide it with your lawyer before you announce it.
Correction to the earlier version of this article: we previously cited Pasal 1460 KUHPerdata (risk passing to the buyer at signing). SEMA No. 3/1963 declared that article no longer applicable; in practice risk follows delivery. Spell out risk transfer explicitly, for example by Incoterms, rather than relying on the Code.
3. Silence on disputes means years in court
If the contract says nothing about dispute resolution, the default is litigation in the district court: first instance, appeal, cassation. That can take years before there is an enforceable judgment.
Fix it in the draft: a three-step escalation clause:
- Good-faith negotiation for a fixed period (for example 14 days).
- Mediation.
- Binding arbitration, commonly at BANI, with the seat, governing law, language and number of arbitrators stated.
Under UU No. 30/1999, the arbitral tribunal must decide within 180 days of being constituted (Pasal 48), and the award is final and binding (Pasal 60). Domestic awards are registered and enforced through the district court; foreign awards through the Central Jakarta District Court under the 1958 New York Convention.
What changed in 2025
- BANI 2025 Rules. They introduce emergency arbitration for urgent interim relief, plus multi-party and multi-contract procedures. The Rules carry no formal effective date; according to BANI's confirmation reported by Indonesian law firms, cases filed on or after 2 January 2025 follow the new Rules. If your clause names an older edition, check which applies before filing.
- Constitutional Court Decision No. 100/PUU-XXII/2024 (pronounced 3 January 2025) removed the word "dianggap" from the definition of an international arbitral award in Pasal 1 angka 9 UU 30/1999, reaffirming a territorial test. Where the award is rendered now matters more for how it is enforced.
A four-step response framework
| Step | What to do |
|---|---|
| Draft | Obligations, penalties, acceptance criteria, risk transfer and force majeure scope, all in the contract body. |
| Notify | Written somasi with a deadline. Keep proof of delivery of the notice. |
| Resolve | Negotiation → mediation → arbitration, as the clause sets out. Use emergency arbitration where interim relief is urgent. |
| Enforce | Register and execute the award through the competent court. |
This article is general information, not legal advice. For a specific contract, consult an advocate. Our legal partner is Kantor Hukum WIZA & Rekan.
Sources: KUHPerdata Book III; UU No. 30/1999 on Arbitration and ADR; SEMA No. 3/1963; Mahkamah Konstitusi, Decision 100/PUU-XXII/2024; Makarim & Taira S., Key Changes in the 2025 BANI Rules; SSEK, 2025 BANI Rules and emergency arbitration.