All agreements under the Indonesian Law including commercial agreements/contracts shall be based on the freedom of contract principle promulgated in the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata / Indonesian Civil Code or “ICC”).
Based on Article 1338 of ICC, all agreements that are validly made shall prevail for the parties to such agreement. The word “validly” in Article 1338 of ICC means that the agreement shall qualify with the minimum requirements of a valid and binding agreement based on Article 1320 of ICC.
The minimum requirements of a valid agreement are as follows:
- the Agreement is made by the parties;
- the parties have the legal capacity to enter into the Agreement;
- the parties agreed on a certain amount and/or object;
- the object of the Agreement does not contravene the prevailing laws and regulations as well as common social norms (i.e., it does not contravene UUD 1945 Constitution or any other laws and regulations).
Furthermore, the Agreement must be made in Bahasa Indonesia language according to Law No. 24 of 2009 on Flag, Language, and State Symbol, including National Anthems ("Law 24/2009”) or at least, made in bilingual format (e.g., English and Indonesian language).
Lastly, the Agreement must meet the minimum provisions as stipulated in Ministry of Trade Regulation No. 24 of 2021 on Engagement for Goods Distribution by a Distributor or an Agent (“MoTR 24/2021”) Article 6 paragraph (3), such as:
- name and address of the parties;
- intent and purpose;
- status of agency or distributorship;
- type of traded goods;
- marketing regions;
- rights and obligations of each party;
- authorization;
- time of validity;
- procedure of termination of the agreement;
- procedure of dispute resolution;
- governing law; and
- grace period for resolution.