In every contractual legal relationship, validity serves as the key determinant of whether an agreement holds binding force. In Indonesia, this validity is explicitly regulated under Article 1320 of the Indonesian Civil Code (KUHPerdata), which establishes four primary conditions for the legitimacy of a contract: agreement, legal capacity, a specific object, and a lawful cause.
Why Is Contract Validity Important?
Validity is not merely a matter of formality. A valid contract provides legal certainty for the parties involved. By fulfilling the necessary requirements, a contract holds the force of law for the parties who enter into it, in line with the principle of pacta sunt servanda as stipulated in Article 1338 of KUHPerdata. A valid contract is not only a formality but also offers legal certainty and protection for all parties involved.
Principles Supporting Contract Validity
- Freedom of Contract Parties are free to determine the content, form, and execution of the contract, provided it does not violate laws, morals, or public order.
egulated in Article 1338(1) of KUHPerdata, it states: “All agreements legally made shall act as laws for those who have made them,” providing room for the parties to decide the content, form, and method of contract execution as long as it does not violate legal norms, morality, or public order.
This principle is also supported by legal doctrines that recognize the freedom to create new contracts (innominate contracts) as long as they do not violate legal norms.
- Consensualism A contract is considered valid once mutual agreement is reached. No special formalities are required unless stipulated by law.
Embedded in Article 1320(1) of KUHPerdata, which states: “The agreement of those who bind themselves,” and reinforced in Article 1338(1), declaring that a contract becomes valid as soon as an agreement is achieved.
Consensualism implies the absence of formalities (naked pactum); a mutual declaration of intent suffices.
- Good Faith Throughout all stages—from negotiation to contract execution—the parties must act honestly and respect each other’s rights.
Regulated in Article 1338(3) of KUHPerdata, which states: “An agreement must be executed in good faith.”
Good faith must exist from the pre-contractual stage when the parties are negotiating until the contract’s execution. Ridwan Khairandy notes: “Good faith must already exist during the pre-contract phase, where the parties begin negotiations to reach an agreement and during the contract execution phase.”
- Legal Certainty The contract must be clear in terms of language and substance, ensuring it can be consistently enforced.
The pacta sunt servanda principle in Article 1338(1) of KUHPerdata obligates contracts to be adhered to and respected as laws for the parties.
- Balance Rights and obligations of the parties must be equitable to avoid unilateral disadvantages.
Although not explicitly mentioned in KUHPerdata, this principle is implicitly contained in the requirements for “a lawful cause,” good faith, and propriety as stated in Articles 1320 & 1338.
Implementation in Practice
The validity of contracts has grown increasingly complex in the digital era. Electronic contracts must still fulfill the requirements of Article 1320, supplemented by authentication clauses and digital signatures per Article 18(1) of the Electronic Information and Transactions Law (UU ITE). Studies confirm that both manual and electronic formats hold equal legal force as long as they meet these components.
Legal Consequences of Invalidity
An invalid contract holds no legal force. The aggrieved party may seek annulment or restitution. Moreover, courts tend to enforce substantive justice by ensuring no party is disadvantaged due to an imbalance in the contract.
Recommendations for Legal Practitioners
- Ensure that all agreements meet the requirements stipulated in Article 1320 of the Civil Code.
- Emphasize the principle of good faith at every stage of the agreement.
- Use clear and unambiguous contractual language.
- Always conduct due diligence on the legal capacity of the parties before drafting a contract.
Conclusion
Contract validity is not just about legal compliance; it also reflects fairness and transparency in legal relationships. By understanding the principles underlying validity, we can create agreements that are not only legally robust but also fair to all parties. Validity serves as the cornerstone ensuring that contracts are executed effectively and deliver maximum benefits to the parties involved.
References
- Subekti, Law of Agreements, Intermasa.
- Sophar Maru Hutagalung, Business Contracts in ASEAN.
- Desy Nurwiyati, “Validity and Legal Certainty,” Parliament, Vol. 2 No. 2, June 2025.
- Law, Development & Justice Review, “Freedom of Contract…,” Vol. TBA.
- Legal Reasoning Journal, Paramita, “Good Faith Analysis…,” Vol. 5 No. 2, June 2023.
- Ridwan Khairandy, Good Faith in Freedom of Contract, Jakarta: Postgraduate Program FH-UI, 2003.
- Niru Anita Sinaga, Harmony of Principles in Contract Law….
- Desy Nurwiyati & Cathleen Lie, “Validity and Legal Certainty in Contracts…,” Parliamentary, Vol. 2 No. 2, June 2025.