Drafting an “Anti-Dispute Contract”

• Admin
• News and Insights
• August 26, 2025

DRAFTING AN “ANTI-DISPUTE CONTRACT”

The drafting of a contract with precision and clarity is not merely a matter of legal formality but constitutes a crucial step in preventing or minimizing potential disputes in the future. A contract is the fundamental basis for establishing cooperation that is healthy, fair, and sustainable. Therefore, the principles of contract drafting must emphasize clarity, the balance of rights and obligations, as well as the implementation of dispute resolution mechanisms from the outset. Thus, what are the essential components in drafting a contract?

Comparisi and Legal Capacity of the Parties

Comparisi in a contract refers to the section that sets forth the identity and legal standing of the contracting parties. It functions to establish that the parties involved in the contract possess legal capacity (capacity to contract) and authority (authority of agent) to perform the acts stipulated in the agreement. In other words, comparisi ensures that the natural or legal persons signing the contract have the legal right to engage in the contractual acts therein.

Identity of the Parties

In contract formation, it is mandatory to clearly specify the identity and legal capacity/authority of the parties, such as in a notarial deed (notarial instrument). Article 38 paragraphs (1) and (3) of Law No. 2 of 2014 concerning Amendments to Law No. 30 of 2004 on the Office of Notary provides that every deed shall consist of a preamble, body, and conclusion. The body of the deed must contain:

1. 1. 1. Full name, place and date of birth, nationality, occupation, title, status, and domicile of the appearers and/or the persons they represent;
      2. A statement regarding the legal authority of the appearers (authority to act);
      3. The contents of the deed reflecting the will and intention of the parties concerned; and
      4. Full name, place and date of birth, occupation, title, status, and domicile of each identifying witness.

Object of the Agreement

Article 1338 of the Indonesian Civil Code (KUHPerdata) enshrines the principle of freedom of contract (freedom of contract), stating:

“All agreements made in accordance with the law shall apply as law for those who have made them. Such agreements may not be revoked except by mutual consent or on grounds authorized by law. Agreements must be performed in good faith.”

The object of a contract (subject matter of contract) must satisfy the objective elements:

1. 1. 1. Concerning a determinate thing (certainty of subject matter), i.e., the contractual object must be specific and ascertainable so that the rights and obligations of both parties can be clearly identified;
      2. A lawful cause (lawful consideration), i.e., the contract must not contravene law, morality, or public order.

Default

Wanprestasi refers to the condition in which one party to a contract fails to perform their obligations as stipulated, or performs them untimely, improperly, or in a manner inconsistent with the agreed standards. This constitutes breach of contract (nonperformance or default), which may arise from negligence or deliberate omission.

According to Subekti in Hukum Perjanjian (Law of Contracts), the elements of wanprestasi comprise:

1. 1. 1. Failure to perform the agreed prestation;
      2. Performance not in conformity with contractual terms;
      3. Performance not within the stipulated time frame; and
      4. Conducting acts expressly prohibited under the contract.

Tax Imposition

Transactions or activities governed by a contract may give rise to tax liability (tax obligation) if they constitute taxable objects under prevailing tax legislation. Article 18 paragraph (1) of Government Regulation of the Republic of Indonesia No. 44 of 2022 concerning the application of Value Added Tax (VAT) on goods and services and Luxury Goods Sales Tax provides:

“A written contract or agreement concerning the delivery of Taxable Goods and/or Taxable Services must at least contain:

1. 1. 1. The contract value;
      2. The tax base; and
      3. The amount of VAT or VAT and Luxury Goods Sales Tax due.”

If the contract value already includes VAT or VAT and Luxury Goods Sales Tax, this must be expressly stated in the contract. Otherwise, the contract value shall be deemed the tax base.

Domicile for Dispute Resolution

The choice of domicile for dispute resolution (choice of forum or jurisdiction clause) in a contract is grounded in Article 1338 of the Civil Code (freedom of contract). Moreover, Article 24 of the Civil Code allows the parties to designate a domicile of choice other than their actual place of residence. Such election may be absolute or limited, depending on the agreement. Consequently, any writs, summons, or claims may be filed at the chosen domicile and adjudicated by the competent court therein.

Authors:

Petrus Gabe Pandapotan

Evi Mutiara

Editor:

Muhammad Arief Ramadhan, S.H.