In business practice, many parties assume that an agreement has legal force only after both parties sign it. This assumption is common, but it is not always correct.
Under Indonesian civil law, an unsigned agreement may still be legally binding in certain situations.
The law does not focus on form alone. Instead, it examines whether the parties have reached mutual consent. This principle often creates legal consequences that business actors do not anticipate.
The Principle of Consensualism in Contract Law
Indonesian contract law recognizes the principle of consensualism. This principle means that an agreement exists once the parties reach consent. A signature does not always determine its validity.
Article 1320 of the Indonesian Civil Code sets four requirements for a valid agreement. The law requires consent, legal capacity, a specific subject matter, and a lawful cause. It does not generally require a written document or a signature.
Because of this rule, the law can recognize an unsigned agreement as valid when the facts show a clear meeting of minds.
Legal Basis of an Unsigned Agreement
Consent plays a central role in contract formation. Parties may express consent through oral discussions, written communications, or electronic messages.
For example, emails, chat messages, or meeting minutes can show agreement on essential terms. Courts often rely on this evidence when assessing disputes. Judges focus on substance rather than form.
This approach aligns with general contract principles recognized in many legal systems worldwide, including those discussed in international legal references such as Britannica’s explanation of contract law.
Risks of Unsigned Agreements in Business Practice
In modern business activities, parties often negotiate through emails before signing a contract. Many consider this phase non-binding. However, the law may interpret these communications differently.
Risks arise when one party performs obligations based on the agreement. This performance may include delivering goods, providing services, or making payments. In such cases, the other party cannot easily deny responsibility.
Disputes frequently arise from unilateral cancellations or changes to agreed terms. These disputes often occur outside formal litigation but still create legal and commercial consequences.
Managing Legal Risks Before Signing
Business actors should treat pre-contractual communications carefully. Clear language, reservations, and written disclaimers help limit unintended obligations.
Understanding when the law considers an agreement legally formed is essential. An unsigned agreement does not automatically mean no legal risk exists.
By maintaining legal awareness and structured communication, businesses can prevent disputes that arise from incorrect assumptions rather than bad faith.