Have you ever had your contract partner suddenly say they won't meet their obligations before the work begins? How did you feel? Frustrated? Disappointed? Betrayed?
Nowadays, the world recognizes a new concept of breach called anticipatory breach, a breach of contract that is anticipated due to one party’s indication or strong intention that they will not fulfill their obligations. This type of breach occurs when one party to the agreement explicitly or implicitly states that they refuse to fulfill their obligations before the contract performance date. Consequently, it grants the other party the rights to immediately terminate the contract and claim damages before the actual breach occurs. It is considered efficient because of preventing further harm and providing earlier legal certainty to the harmed party. This concept is widely acknowledged in common law systems, for example in the United States and the United Kingdom.
This concept is gaining popularity in modern legal practice, where certainty and efficiency are prioritized. However, no explicit provision regulating anticipatory breach exists in the Indonesian civil law system, which is still based on the Dutch-inherited Civil Code or Burgerlijk Wetboek, also known as the Indonesian Civil Code (hereafter as “BW”). In spite of the absence of explicit regulation concerning anticipatory breach, this writing explores the potential application of anticipatory breach within the Indonesian legal framework through progressive interpretation of existing norms. Besides, it seeks to foster academic discourse on the possibility and urgency of adopting the anticipatory breach in Indonesia’s legal system.
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In order to understand the prospective legal use of anticipatory breach in indonesian legal system, we must first examine what the difference between breach of contract stated in the BW and anticipatory breach is. Breach of contract or wanprestasi in the BW is the failure to execute an obligation that has been confirmed in a contract. It, as stated in Article 1243 BW, can be expressed in three forms: 1) failure to perform the obligation, 2) performing the obligation late, or 3) performing the obligation in a manner that does not comply with the agreed terms. In other words, breach of contract in the BW is referred to as a violation of the obligations as established in the contract.
Meanwhile, anticipatory breach is declared when one party indicates, either explicitly or through clear actions, that they will not fulfill their contractual obligations before the agreed time for performance. Signaling the other party that the contract will not be executed as agreed is enough to make it as evident that they have no intention of fulfilling the contract, thus violating the terms even before the time for performance has arrived.
Even though both concepts emphasize the violation of contract terms, they have notable features in terms of manner and timing. Whereas wanprestasi in BW refers to a failure to perform, delayed performance, or improper performance, anticipatory breach only need indication, either explicitly or through actions, that they will not fulfill the contract. In the aspect of timing, anticipatory breach addresses the breach before the actual performance date arrives while wanprestasi is declared when the performance is due and the obligation is unfulfilled. In other words, anticipatory breach is not recognized as a form of breach of contract under the BW.
This lack of regulation creates legal gap that could be detrimental to the party acting in good faith. This circumstance often put the harmed party in uncertainty, having to choose between waiting for the actual breach or filing a lawsuit at the risk of being considered as making a premature filing. While the signs of a breach are crystal clear, a solid legal foundation to take immediate action before the breach actually occurs is often lacked by a party anticipating a breach by its contractual partner. Considering that situation and the increasing complexity and pace of commercial transactions, the importance of recognizing anticipatory breach has become more relevant as a preventive legal protection instrument.
In this context, Article 1338 paragraph 3 BW and Article 1339 BW has regulated general principle in civil law, such as good faith, propriety and fairness. It is reasonable to suggest that it can be used as an interpretative basis to implicitly allow the application of anticipatory breach, because as Satjipto Rahardjo said, principle is the heart of norm. Therefore, in my opinion, a progressive interpretation of these principles could be a key to open the door for more adaptive and responsive legal protection in this modern and complex contractual agreement.
As it said, the principles of good faith, propriety, and fairness can be interpreted to support anticipatory breach. For instance, the principle of good faith, as mentioned in Article 1338 paragraph (3) BW, requires that contracts shall be performed with honesty and sincerity. Expressing not to perform the contract explicitly can be considered a violation of this principle, becuase it indicates bad intent and causes harm to the other contracting party.
Meanwhile, the principle of propriety, as set forth in Article 1339 BW, shall be executed in contract. Thus, the contract must be agreed upon in a fair and balance manner. In cases of anticipatory breach, a party’s unilateral decision not to fulfill its contractual obligations may be regarded as inappropriate owing to causing harm to the other party without just cause and disregarding the expectations and the equilibrium of rights and obligations between the parties.
In addition, the principle of fairness, as prescribed in Article 1339 BW, emphasizes that contracts are binding not only for matters explicitly stated therein, but also for everything that, by the character of the agreement, is required based on fairness, custom, or statutory provisions. When one party declares an intention not to fulfill its obligations before the time for fulfillment, it can be considered a violation of the principle of fairness due to undermining the legitimate expectations of the other party to a fair execution of the contract. Accordingly, it is plausible to argue that these principles can provide a basis for implicitly supporting the application of anticipatory breach in legal interpretation.
Moreover, the anticipatory breach concept in Indonesian contract law could be strengthened through a systematic interpretation of civil law principles. Notwithstanding emphasizing the enforceability of the agreements, the principle of pacta sunt servanda, as pursuant to Article 1338 BW, does not preclude the prospect of adjustment when a clear intention to breach the agreement is declared. This principle should not only be viewed as a binding force of agreement, but also a preventive measure against the contract breach if contract is not upheld. In other words, the law is required to be able to prevent harm by intervening at the right moment.
To sum up, although there is no provision concerning anticipatory breach in BW, general principles in BW, such as good faith, propriety, and fairness can be taken as entry point for interpretation to implicitly accommodate this concept. It is because anticipatory breach can be seen as a violation of these principles. Hence, a progressive and systematic interpretation of these civil law principles is essential to provide more effective legal protection, prevent further harm, and ensure legal certainty.
Theoretically, anticipatory breach can be viewed as a manifestation of the evolution of contract law functions in a complex modern society. As a result, it is crucial for Indonesia to consider the explicit recognition of anticipatory breach through civil law reform. Considering the needs of certainty and efficiency in contemporary commercial transactions, Indonesia needs to adjust its contract law to be more modern, adaptive and fair contract law system at the earliest opportunity. (Research and Development/Fac)
Reference:
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Rahardjo, Satjipto. (2000). Ilmu Hukum. Bandung: Citra Aditya Bakti.
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Journal:
Cahyono, Akhmad Budi. (2020). Default and Termination of Contract: a Comparative Study Between Indonesia and the UK. Yuridika. Vol. 35 No. 3, 469-483. https://doi.org/10.20473/ydk.v35i3.17679
-----. (2020). Implementation of Common Law Doctrine in Indonesian Law of Obligation. Advances in Economics, Business and Management Research. Vol. 130, 320-326. https://www.atlantis-press.com/article/125937739.pdf
Meyer, L. J. (1953). Anticipatory breach of contract—Effects of repudiation. University of Miami Law Review, 8(1), 68-75. https://repository.law.miami.edu/cgi/viewcontent.cgi?article=3854&context=umlr
Nugraha, Delsa Wahyu, Setyawan, Fendi, & Soetijono, Iwan Rachmad. (2024). Global Impact of Breach of Good Faith in Insurance Contracts. Indonesian Journal of Innovation Studies Vol. 25, no. 2 (2024): 1074, https://ijins.umsida.ac.id/index.php/ijins/article/view/1074.
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S., M. Hillman Mehaga. (2022). Pengakhiran Kontrak Sebelum Terjadi Wanprestasi oleh Pihak yang Mengantisipasi Kegagalan Pelaksanaan Kewajiban. Dharmasisya: Jurnal Program Magister Hukum FHUI Vol. 2, No. 2 (2022): 34. https://scholarhub.ui.ac.id/dharmasisya/vol2/iss2/34.
Sulistianingsih, Dewi, Wijaya, Christian Chandra, Yusof, Rahmawati Mohd & Adhi, Yuli Prasetyo. (2024). Juridical Consequences of Anticipatory Breach as a Form of Breach of o Contract. Journal of Indonesian Legal Studies Vol. 9 (Issue 1 (2024), 131-154. https://doi.org/10.15294/jils.vol9i1.4537
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