COVID-19 Outbreak as a Force Majeure Event and Its Consequences to the Contractual Implementations

“Force Majeure” is often found in any commercial contracts to anticipate certain unexpected events, such as the current COVID-19 virus outbreak. The term, so far, has not been specifically regulated in Indonesian law. 

However, as we quoted from the Black’s Law Dictionary, the force majeure is defined as the concept of unexpected and uncontrolled events or circumstances that unable to be anticipated which prevents someone from doing or completing something that he or she had agreed or officially planned to do. The definition is roughly equal to some articles stipulated in the Indonesian Civil Code (“ICC”) as follows:

  • Article 1244
    “If there is any reason for such, the debtor is compensated for costs, damages, and interests if he cannot prove, that the non-performance or the late performance of such obligation, is caused by an unforeseen event, for which he is not responsible and he was not acting in bad faith.”
  • Article 1245
    “The debtor needs not to compensate for costs, damages or interests if uncontrollable circumstances or an accident prevented him from giving or doing an obligation, or because of such reasons he committed a prohibited act.”
  • Article 1444
    “If a specific asset that constitutes the subject matter of the agreement is destroyed, becomes unmerchantable, or are lost, to the extent that one is not aware whether or not the assets still exist, the obligations are discharged, insofar as the assets are destroyed or lost due to no fault of the debtor, and before he defaulted on delivering the assets.”
  • Article 1445: 
    “If the assets owed are destroyed, becomes unmerchantable or are lost through no fault of the debtor, the debtor is required, if he has any rights or claims for recourse related to these assets, to assign them to the creditor.”

These articles mean the affected person – who is bound and has obligations under the agreement he agreed – could be released from the obligation to pay compensation, costs and interest, and/or from responsibility to implement his obligations if he is unable to implement his obligations due to unforeseen and uncontrollable conditions. Furthermore, in pursuant to the Judgment of the Supreme Court of the Republic of Indonesia No. 409 K/Sip/1983, the force majeure is “the situation of force is caused by a disaster which properly cannot be prevented by those who must perform the contractual obligation”.


Further to the ICC, the affected party could be released from his contractual obligations if the Force Majeure events meet following conditions:

  1. Occurrence of an unexpected and uncontrollable event (temporarily or permanently);
  2. These events create obstacles which cause the person’s inability to perform the contractual obligations; and
  3. These obstacles are not/beyond mistakes caused by the affected party.

The affected party could not be released from his obligations to perform his contractual obligations/performance if the contract is agreed at the time the Force Majeure happening and the Parties are assumed have known the impact of the situation would affect their performance under the contract.

For your further information, it is important to the affected parties to ensure the existence of specific Force Majeure clause in the contract that can be implemented to cover the event of Force Majeure. This clause is required to prevent differences of opinion or conflict between the Parties when Force Majeure occurs. The Force Majeure clause will also specify how the Parties performing their obligations and mechanism of contract enforcement during and after the Force Majeure event ends.

COVID-19 as a Force Majeure Event

Over the COVID-19 Pandemic, the Indonesian Government has issued several decrees and regulations. Firstly, on 13 March 2020, President Joko Widodo formed an acceleration team for handling the COVID-19 outbreak through Presidential Decree No. 7 of 2020 as amended into Presidential Decree No. 9 of 2020. Secondly, on 31 March 2020, the Government also issued a social interaction limitation regulation as stipulated in the Government Regulation No. 21 of 2020 (“GR 21/2020”). Lastly, on 13 April 2020, the Government has determined the “National Disasters” status through Presidential Decree No. 12 of 2020. Then the question now, is COVID-19 characterised as a Force Majeure?

Indeed, it is important for the affected party to prove to the other parties in the contract that the situation of COVID-19 is fulfill the elements of Force Majeure and any failure to perform the contractual obligations was beyond his control and could not be prevented or mitigated. For example, the affected party could prove that the social limitations policy as stipulated in GR 21/2020 have halted his ability to carry out his contractual obligations or the defaulting party is affected by COVID-19 pandemic so that he is unable to perform his obligations during the recovery period.

As a consequence, Force Majeure event will bring below impacts: 

  1. The termination of the contract: 
    If the force majeure is absolute or permanent. For example, the antique car as an object of the agreement has been destroyed by fire and the car has not been handed over from the Seller to the Buyer. Unfortunately, the Seller is unable to replace the new one, then the contract is agreed to be terminated;
  2. The postponement of performing the agreement without paying the compensation: 
    If the force majeure is temporary, for example, the affected party is unable to sell the object of the agreement due to the temporary restrictions policies set by the government. Please be informed, if the government revokes the policy, then the performance of the agreement shall be resumed as per normal.

In conclusion, the application of a Force Majeure clause in a contract is very much depending on the parties’ consensus. If the affected party fails to prove that the condition of COVID-19 halt him from performing his contractual obligations, then it can potentially cause disputes between the parties. 

We hope the above discussion is of assistance. Should you have any queries regarding this matter, please do not hesitate to contact us.

DISCLAIMER: The information provided by Sutedja & Associates (“S&A”) on this publication does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this publication are for general informational purposes only. All liability with respect to actions taken or not taken based on the contents of this publication are hereby expressly disclaimed. All S&A publications are copyrighted and may not be reproduced without the written consent of S&A.

Photo by Tedward Quinn on Unsplash

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