Abstract a legal construction recognized by the

Abstract

This
study analyzed the abuse of circumstances as a factor that delimits the freedom
of making a contract associated with the onset of the contract, not because of
the casue which is not allowed. The abuse of circumstance is not only related
to the content of a contract, but rather related to what had happened at the
time of the inception of the contract as one of the parties feels constrained
to determine their will in a contract. It concerns on the circumstances that
contribute to onset of the contract (i.e., taking benefit from other’s
circumstance does not cause the content or intent of a contract be not
permissible, rather, it may cause the missused will be restricted). The abuse
of circumstances may happen due to one’s superiority over another party. The
superiority is not only economic in nature, but also psychological, or both. Misusing
such superiority may cause circumstance abuse. It is due to inequality of
bargaining power that the weak cannot avoid from, while the stronger party abuses
the circumstance by imposing the contents of the contract that leads to the
inequal advantages for both parties. In Indonesia, the abuse of circumstances
is often used as a cause to abrogate a contract due to the defect of will,
although it is not yet regulated in legislation but rather derived from a legal
construction recognized by the jurisprudence of the Supreme Court. It is definitely
differenct from Netherlands that has regulated its misbruik van omstandigheden
in article 3:44 lid 1 Nieuw
Burgerlijk Wetboek.

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Keywords: Circumstance
Abuse, the Freedom of Making Contract, the Defect of Will, Comparison, Netherlands,
Indonesia, Judiciary.

 

JEL
Classification: K11, K22, K23.

 

Introduction

The source of contract law in Indonesia recently applies Burgerlijk Wetboek (BW). Another source
of law in fragmentary setting is found in multiple legal regulations and jurisprudence.
Many countries have made their contract law more modern, including Netherlands
that uses a new codification called Nieuw
Burgerlijk Wetboek (Simamora 2016, 1). 

A contract is established based on an agreement. In
normal situation, the interest corresponds to the statements of a contract.
However, it is not impossible to make a deal due to the defect of will. The
establishment of a contract due to the defect of will may make the contract
abrogated (vernietigbaar) (Huda
2017,56). In BW, there are 3 (three) cause making such contract abrograted/null.
Those include: digression or dwaling (Article 1322 BW), constraint or dwang
(Article 1323-1327 BW), and deception or bedrog (Article 1328 BW).
Furthermore, In Indonesia, the abuse of circumstances is used as a reason to
abrogate a contract due to the defect of will, although it is not yet regulated
in legislation but rather derived from a legal construction recognized by the
jurisprudence of the Supreme Court. It is definitely differenct from Netherlands
that has regulated its misbruik van
omstandigheden in article 3:44 lid
1 Nieuw Burgerlijk Wetboek. (Hernoko, 2010: 168).

Therefore, this study investigated a legal issue that
deals with the reason of abrogating a contract due to circumstance abuse. It
aimed to figure out the substantial nature of contract cases.

 

1.      
Circumstance Abuse as a Factor
Delimiting the Freedom of Making a Deal

The nullification and abrogation of a contract is set in Book III Section
8 Chapter IV, Article 1446 up to Article 1456 BW. The provision set in BW
briefly yet partly regulates the aspects of nullification, especially the
contracts made by a minor, placed under curatele, and having the defect
of will. A defect of will may happen due to a constraint, error, deception, and
circumstance abuse (Budiono, 2008: 367). The term of nullification’ has unclear
implementation, as Herlien Budiono argued that:

 “When a regulation asserts that there will be
a legal consequence, it simply say “null”, however, it may sometimes use the
term “null and void” (Pasal 879 BW) or “powerless” (Pasal 1335 BW). The usage
of those terms is quite confusing since the same terms are sometimes used with different
meaning, such as “null and void” or “can be null”. In Article 1446 BW and the
other ones, to decide the nullification of a legal action, we find some terms
such as ‘null and void’, ‘null it’ (Article 1449 BW), ‘requesting for
nullification’ (Article 1450 BW), ‘statement of nullification’ (Article
1451-1452 BW), ‘aborted’ (Article 1545 BW), and ‘null and void’ (Article 1553
BW).

 

Therefore, the terms of nullification and abrogation
are considered different, but they are used for the similar reasons. Those all
regulations, however, do not describe the execution of nullification and
abrogation on a contract, in case of under which conditions or reasons it may
lead a contract into the qualification of nullification or abrogation (Utrecht
1986, 109).

Article 1320 BW is one primary instrument used to
examine the legality of a contract. In that article, 4 criteria are mentioned
to identify whether or not a contract is legal. Those are as follow.

(a)    
Their contract
confines them (de toestemming van degenen
die zich verbinden);

(b)    
The
proficiency to make a contract (de
bekwaaheid om eene verbintenis aan te gaan);

(c)    
Particular
notion (een bepaald onderwerp);

(d)    
A rightful and
legal cause (eene geoorloofde oorzaak).

Agus Yudha Hernoko defines a term called “UJI 1320” to
examine the legality of a contract based on the article 1320 BW. It refers to a
systematical method to examine and detect the legality of a contract (Simamora,
2010: 30). Examining the legality of a contract by Agus Yudha Hernoko
corresponds to in casu articles, including “UJI 1335, UJI 1337, UJI
1339, UJI 1347”. This method is a further standard to confirm the result of the
first examintation “UJI 1320”. In addition, M. Isnaeni formulates 4 (four)
criteria, which are linked to certain related articles, for the legality of a
contract as follow.

(a)    
The
contracting parties agree to make a contract (vide Article 1321-1328 BW);

(b)    
The
contracting parties are proficient to do legal actions (vide Article 1329-1331
BW);

(c)    
The
characteristics and the width of the object of a contract can be identified
(vide Article 1332-1334 BW);

(d)    
The causa is
legal or rightful (vide Article 1335-1337 BW).

In relation to those four criteria, based on the
article 1320, for the legality of a contract BW, further explanation dealing
with consequences that occur due to the unfulfillment of each of those criteria
involves: first, it deals with agreement and proficiency, considered as
subjective criteria since those relate to the subject of a contract. second,
 it deals with the criteria of
particular object or legal causa, considered as objective ones (Hernoko
2010,160).

Applying the terms of nullification and abrogation
over the legality of a notarial deed must be linked to the legality of a
contract or treaty. Those include the term ‘null and void’ (nietig) which becomes a common term to
judge whether a contract cannot meet the objective criteria; referring to
certain things (een bepaald onderwerp)
and rightful causa (eene geoorloofde
oorzaak), and the term ‘can be null’ on which a contract is considered
unqualified with the subjective criteria; referring to ‘their contract confines
them’ (de toetsemming van degenen die
zich verbinden) and ‘the proficiency to make a contract’ (de bekwaamheid om eene verbindtenis aan te
gaan).

When it does not meet the subjective criteria, a
contract can be null (vernietigbaar)
as long as particular parties with certain interests propose a request for
nullification (Prodjodikoro 1989, 121). This subjective criteria is always
close to the threat of nullification by parties with certain interests,
including parents, relatives, or other representatives. In order to avoid such threat,
a request for confirmation that a contract will still be applied and confining
can be proposed to those parties. This nullification is called as relative
nullification (Adjie 2009,65).

However, when it does not meet the objective criteria,
a contract will be null and void (nietig)
without needing any request for confirmation by contracting parties, and thus,
the contract is considered never exist and not confining to anyone. The null
contract may absolutely happen on which the contract is unfulfilled, whereas,
the regulation for that legal action must be made through predermined fashion
or against the morality or common rules. As the contract is considered never
exist, any principle is no longer applied for the contracting parties to make a
suit through various manner. For instance, a contract for providing security
right as a guarantee of loan payment from a debtor to a creditor must be
established in the form of PPAT deed; in fact, it is not fulfilled. Thus, the
legal action is considered null and void. This nullification is called absolute
nullification (absolute nietigheid).

Having a deal means that the contracting parties
clarify their will to end an agreement or that one party has corresponding will
while the others not. The clarification of willing is not always clearly
pronounced. It may also be expressed through attitudes or other settings that
clarify the willing of the contracting parties.

The first subjective element deals with an agreement
independent or without any pressure and intervention from any party but solely
the interests of the contracting parties. Article 1321 BW confirms that when it
finds that a contract is made under pressure or due to certain threat making
the threatened party anxious and has no choice but approving the contract, it
may lead to the nullification of the contract.

Subekti defines this matter as a psychological
coercion in the form of threat (e.g., a violence causing anxiety or fear) and
it refers to an action against the law (Subekti, 1989: 23).

A contract derived from an agreement that emerges
because of the existence of demand and offering may possibly be made due to the
defect of will (wilsgebreke). Such
contract has legal consequence including the nullification of the contract (vernietigbaar). Based on BW, there are 3
(three) cause for the nullification of a contract due to the defect of will, as
follow.

(a)      Digression or dwaling
(Article 1322 BW)

Digression may happen on which it deals with “the nature
of things or person” and the opponent party must identify or, at least, see the
characteristics or circumstance that causes digression for the other party (in
relation to the identified or recognized criteria; kenbaarheidsvareiste). Therefore, the digression over the nature of
things linked to the forthcoming circumstance due to the self-mistakes or
self-risk agreement may not be used as a cause for the nullification of a
contract.

(b)     Constraint or dwang (Article 1323-1327 BW)

Constraint happens on which an individual is willing
to end a contract (making a deal) due to a threat that points to an action
against the law. The threat considered as one against the law includes:

(1)     The threat itself is an action against the law (e.g.,
murder, abuse).

(2)     The threat is not an action against the law, however,
it aims to attain something that does not belong to the perpetrator’s right.

(c)     Deception or bedrog (Article 1328 BW)

Deception is a kind of disqualifying digression. It
means that deception is likely to happen when an erroneous illustration on
characteristics and circumstances (digression) is derived from a misleading
action. To succeed the tenet of deception, a misleading illustration is
resulted from a series of deceptions (kunstgrepen).

 

Deception is a cause to abrogate a contract. When one
of the contracting parties does a deception in such a way making another party
approve the deal due to the deception. Such deception is done through a set of
misleading statement or utterance that relates to the content of the deed from
one contracting party toward another party, and thus, it makes the deceived
party approve the deed. It is a must to prove such deception as an actual
disadvantage by one of the contracting parties.

 

In addition to the cause leading to the defect of will
as previously described, a doctrine of circumstance abuse has developed (Misbruik van Omstandigheden/undue influence)
as an element of a will defect which may cause the nullification of a deed or
contract. This doctrine is used by means of ones’ function allowing them to
oppress another party. For instance, using his function (either in government,
politic or society), in economic context, the other parties feel incapable to
avoid the power of his function but approving the content of the deed offered
to them. In short, such doctrine tends to count on one’s circumstance
(situation and surroundings) rather than displaying any physical violence or
threat.

The term ‘circumstance abuse’ in Indonesia law is
similar to the term misbruik van
omstandigheden, and undue influence
(Scalise 2008, 42). In common law system, in addition to undue influence, it is
also known as unconscionability.
However, although both of them are different, they are similar due to the inequality
of offering among the contracting parties. When a contract is derived from
infelicity or inequity of inequal relationship, it is called undue influence (biased relationship). The circumstance abuse –as a factor delimiting
the freedom of making contract- relates to the circumstance on which the
contract is made, not due to a legal or rightful cause (Rafiei, 2011: 47). The
circumstance abuse relates not only to the content of a deed/contract,
but also to all circumstances on which the contract is established since one of
the parties feels constrained to determine their will in a contract. It may happen due to one’s
superiority over another party. This superiority points not only to the aspect
of economy, but also to the psychological one, and/or both of them. Abusing
such superiority may cause a circumstance abuse. It is because of inequality
of bargaining power that the weak cannot avoid from, while the stronger one
precisely tends to impose the contents of the contract which leads to the
inequal advantages for both parties.

In Indonesia, the doctrine or the tenet of
circumstance abuse (misbruik van
omstandigheden) is not yet set in sources of positive law. However, it is
implicitly accepted as in Regulation of the Supreme Court of the Republic of
Indonesia, on Verdict No. 1904 K/Sip/1982, established on 28th
January 1984, that the application of 10% monthly interest is charged to the
debtor who is found violating the principles of obedience and equity
(Pangabean, 2001: 63). This judgment actually asserts that the statement of
will that causes an agreement, when it is due to a “circumstance abuse” by
another party, it refers to the defect of will on which making a contract.

Following Z. Asikin Kusumah Atmadja, circumstance
abuse is defined as a factor that delimits or disturbs a freedom of will to
determine a contract among parties. This possibily happen due to an inequality
and incompatibility on functions among the contracting parties. Hence, it is
not right to classify the circumstance abuse into unrighful causa (ongeooloofde oorzaak), as the unrightful
causa has very specific characteristics, and thus,  it has nothing to do with the defect of will
(Atmadja).

In relation to unrightful causa, although the
disadvantaged party does not define such causa as one to clarify the
nullification of a contract, ex officio judges need to take it into account.
Furthermore, in relation to the defect of will, the statement of null or the
nullification of a contract will be examined by judges only if it is postulated
by the pertinent parties. Therefore, Cohen argues that classifying the
circumstance abuse into the defect of will is rather for the needs of
constructing the law, in case that the disadvantaged party requests for the
nullification of a contract (Hernoko, 2010: 178).

According to R. Cheeseman, in common law system, there
are 3 (three) benchmarks used to classify the existence of unconscinability (Simanjuntak,
2006: 160), as follow.

(1)    
The
contracting parties are in a very inequal position to negotiate the demand and
the offer.

(2)    
The stronger
irrationally uses his dominate power to make a contract by pressure and
inequality on rights and obligations.

(3)    
The weaks have
no option but approving the contract.

 

2.      
Proving the Existence of Circumstance
Abuse on the Establishment of a Contract

BW does not follow the tenet of justum
pretium, a
principle requiring the contracting parties to meet an equal condition between
performance and contra-performance. Thus, the inequal condition of those
matters does not clearly prove the existence of circumstance abuse, since it is
only an indicator that needs further examination. It needs further investigation
that the very inequality on performance happens due to the pressure of certain
circumstance abused by one of the contracting parties (Huda, 2016: 1038).
This pressure of circumstance and/or inequality is not the actual matter. The
more substantial one is proving the existence of any circumstance abuse. Either
in part of economic context or psychological one (Satrio, 2001: 322).

Investigating whether or not the circumstance abuse
exists should be conducted in casuistic fashion. Up to recent day, Indonesia
has no legal regulation that limitatively sets the criteria of circumstance
abuse. Therefore, such case must be seen through objective and rational ways in
relation to the circumstance and condition on which a contract ends and also
through the formulation of both performance and contra-performance within the
contract. Subjectively judging the existence of circumstance abuse without
counting on its objective criteria may cause uncertainties of law and, as the
result, it may harm the justice. 

To identify whether or not the circumstance abuse
exists, several indicators can be used as the compass, as follow.

(a)    
The
formulation of a contract, performance, and contra-performance assigned to the
contracting parties is obviously inequal and even inappropriate.

(b)    
The process of
a contract ends. This happens due to a party abusing a circumstance as he has
more advantageous position in offering, whether in economic or psychological
context.

 

As a common request for the nullification of a
contract due to a defect of will, any substance of disadvanatage is no longer
necessary. It is considered adequate on which evidence shows that a contract is
unlikely to be made without any circumstance abuse. Being disadvantageous is
seen as a forced agreement (opgedrongen),
thus, being disadvantageous (nadeligheid)
is similar to being forced (onvrijwilligheid).
Regarding to Netherlands parliament, disadvantagesrefers to loss in any form
and it relates not solely to legal actions –in terms of inequality on
performance or one-sided clause (exoneratie atau onereuze clausules)
but also to subjective and idiil manner. Disputations on Netherland parliament
shows that the substance of disadvanatage is, in fact, not set in article 3 ;
44 NBW (Budiono, 2008: 20).

 

 

Conclusion

A freedom of making contract refers to a freedom for every individual to
make a contract by considering the legality of the contract as set in
legislation. An equal-position contract may attain proportional equality on its
performance and contra-performance. However, indefinite freedom of making
contract may cause a restraint on other party with lower position to end the
contract. The developing freedom of making contract relates to the development
of contract law. The developing tenet of having good faith in closing a contract
as well as the tenet of circumstance abuse as a cause for the nullification of
a contract may delimit the freedom of making contract.

The doctrine of circumstance abuse is actually a kind
of appreciation as well as protection for the contracting parties, especially
for the weaks. Netherlands sets this doctrine in article 3 : 44 NBW and it
holds a more comprehensive effect on its application. The judges, in making
judgment on abuse cases, must have a strong base. In Indonesia, however, this
doctrine is not yet reinforced by any product of law. Particularly, it is still
in a scope of jurisprudence, which consequences depend on judges’
interpretation when handling cases of circumstance abuse. In the next future,
therefore, the draft of contract law is expected to mention the doctrine of
circumstance abuse in one of its articles relating to the legality of a
contract, especially ones with the defect of will. 

 

References

 

1           
Adjie,
Habib. 2009. Meneropong Khazanah Notaris
dan PPAT Indonesia. Bandung: Citra Aditya Bakti.

 

2           
Budiono,
Herlien.2008. Kumpulan Tulisan Hukum
Perdata di Bidang Kenotariatan.Bandung: Citra Aditya Bakti.

 

3           
Cheeseman,
Henry R. 2003.Contemporary Business &
E-Coomerce Law. New Jersey: Prentice Hall, Upper Saddle Rivver.

 

4           
Hernoko,
Agus Yudha. 2010.Hukum Perjanjian, Asas
Proporsionalitas dalam Kontrak Komersial. Jakarta: Kencana.

 

5           
Huda,
Mokhamad Khoirul, Nugraheni, Kamarudin. 2016. The Nature of  the Contract of  Life Insurance Agency after Enactment of the
Act Number 40 of 2014 on Insurance, Journal of Advanced Research in Law and
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6           
Huda,
Mokhamad Khoirul. 2017. Good Faith in Life Insurance Contract by Indonesia
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7           
Isnaeni,
M. 2000. Perkembangan Prinsip-Prinsip
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8           
Pangabean,
H. P. 2001. Penyalahgunaan Keadaan
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9           
Prodjodikoro,
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10       
Refiei,Maryam
and Manap, Nazura Abdul. 2011. Freedom of Contract in Click Warp Agreements in
Malaysia and the United States of America. International
Journal of Cyber Society and Education,4(1):47-54.

 

11       
Satrio,
J. 1992. Hukum Perjanjian. Bandung: Citra
Aditya Bakti.

 

12       
Satrio,
R. 2001. Hukum Perikatan, Perikatan Yang
Lahir  Dari Perjanjian Buku I. Bandung: Citra Aditya Bakti.

 

13       
Simamora,
Yohanes Sogar. 2010. Hukum Perjanjian,
Prinsip Hukum Kontrak Pengadaan Barang dan Jasa Oleh Pemerintah.
Yogyakarta: Laksbang Pressindo.

 

14       
 Simamora, Yohanes Sogar. 2016. Menuju Pembaharuan
Hukum Kontrak Indonesia. Makalah disampaikan pada Konferensi Nasional
Asosiasi Pengajar Hukum Keperdataan (APHK). Malang: di Fakultas Hukum
Universitas Brawijaya.

 

15       
Simanjuntak,
Ricardo.2006. Teknik Perancangan Kontrak
Bisnis.Jakarta: Mingguan Ekonomi dan Bisnis Kontan.

 

16       
Subekti,
R. 1989. Hukum Acara Perdata.Bandung:
Bina Cipta.

 

17       
Scalise,
Ronald J. 2008. Undue Influence and The Law of Wills: A Comparative Analysis. Duke Journal of Comparative &
International Law, 19(41): 41-106.

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