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How is The Legality of Electronic Contract and Signatures?

How-is-The-Legality-of-Electronic-Contract-and-Signatures

In line with the launch of 4.0 industrial revolution, the use of digital technology has became the preference of most people for doing almost any activities including commercial transactions in both domestic and cross border transaction.

This shifting of transactional behavior, to certain extent affects in the changing on the form of contract or agreement made by people in their daily activities, among which, many people use electronic contract forms for their electronic transactions. In order to anticipate this new phenomena, Indonesian government has responded through the promulgation of series of regulations to regulates and provide legal assurance and certainty in respect to the implementation and legality of electronic transaction including electronic contract pursuant to the Government Regulation Number 82 of 2012 concerning Electronic System and Transaction Operation (GR 82/2012).

The following brief guideline will help you to understand the legality and requirement in respect to electronic contract and signature.

  1. The Validity of  Electronic Contract
  2. Electronic contract is valid if:

    1. there is mutual agreement by and between the contracting parties;
    2. performed by competent legal subject or its authorized representative pursuant to the prevailing laws and regulations;
    3. matters and object of the contract are clear; and
    4. object of the transaction shall not conflicting with the prevailing laws, morality and public order.
  3. The Requirement to Use Indonesian and Adjustments to Standard Clause Provisions
  4. Pursuant to the Article 48 (1) of the GR 82/2012, the electronic contract and other forms of contractual arrangement applied to the Indonesian residents must be made in indonesian language. Furthermore, the Article 48 (2) explained that electronic contract which is made with a standard clause shall observe the requirement for adopting standard clause under the prevailing laws and regulation.

  5. Requirement in respect to the Content of Electronic Contract
  6.  The GR 82/2012 regulates that electronic contract shall at least contain:

      1. Detail Identity of the contracting parties;
      2. Objects of the contract and specifications;
      3. Terms and conditions of the electronic transactions;
      4. Prices and costs;
      5. Procedures for the cancellation of the electronic contract by the parties;
      6. Provision on the rights and entitlements of the impacted party to return defective or damaged goods and/or claim for replacement product in the event of hidden defect or non-conformity of the product; and
      7. Choice of law for the conclusion or closing of the electronic transaction.
  7. Electronic Signatures
  8. On the execution of the electronic contract in an electronic transaction, the existence of electronic signatures has became the urgency for the ratification of the concerned electronic contract. As an evidence of ratification of the contract by the contracting parties, the electronic signature serves as tools for the authentication and verification of the signor as well as the authenticity and integrity of the electronic information.

    The GR 82/2012 stipulates that the use of electronic signatures in an electronic transactions can be generated through various signing procedures. Furthermore, the electronic signatures shall be valid and has legal binding force if:

    1. The electronic signature creation data specifically relate only to respective signor;
    2. The electronic  signature creation data during and at the time of signing process within the sole control and power of the respective signor;
    3. Any changes to the electronic signatures occurring after the time signing can be known;
    4. Any changes to the electronic information associated with the electronic signature after signing time can be known;
    5. There is clarity on the method to verify and identify the signor; and
    6. There is clarity on the method to verify and indicate that the signor has granted approval to the relevant electronic information.

From the above, now we know that an electronic contract is legally valid and recognized under Indonesian Law subject to the mandatory requirement fulfilled by contracting parties. So, there is no reason to hesitate to use technology for contractual arrangement in our transaction, provided that we keep in mind with the applicable legal rules and to ensure that all mandatory requirement for an electronic contract as met.

Author: Halimah Nur Pratiwi
Editor: Andry Yudistira

If you need a legal consultation, you can send an inquiry via email:
mbsh@smartlegal.id.

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