Legal Literacy - In Indonesian contract law, a legally made contract applies as law to the parties who make it. This principle (pacta sunt servanda) is known as the principle of freedom of contract, as regulated in Article 1338 paragraph (1) of the Civil Code. The contract is also binding and exclusive, meaning "Agreements only apply between the parties who make them" (Article 1340 of the Civil Code). However, in order for an agreement (contract) to be declared valid and have legal force, it must meet four (4) fundamental conditions.

4 Valid Conditions of Agreement According to Article 1320 of the Civil Code

In a contract, an agreement must meet four conditions to be valid, namely:
  1. The existence/achievement of agreement (Agreement).
  2. The parties have legal capacity/competence (Capacity).
  3. The object agreed upon is clear (There is a certain thing).
  4. There is a lawful cause (Lawful Cause).
These four conditions are further divided into two important categories that determine the legal consequences.

Subjective Condition (Voidable)

The conditions in points 1 (Agree) and 2 (Capable) are subjective conditions, because they relate to the subject or person making the agreement.
  • Legal Consequences: If the subjective conditions are not met (for example, there is coercion or one of the parties is a minor), then the agreement is voidable (voidable). This means that the agreement remains valid as long as no party files for cancellation with the court.

Objective Condition (Null and Void)

The conditions in points 3 (Clear Object) and 4 (Lawful Cause) are objective conditions, because they relate to the object or content of the agreement itself.
  • Legal Consequences: If the objective conditions are not met (for example, the object is in dispute or the contract is to commit a crime), then the agreement is null and void (null and void). The contract is considered to have never existed from the beginning.

Focus: 'Offer' and 'Acceptance' in the Formation of an Agreement

The first valid condition of an agreement is "Agreement". In Article 1320 of the Civil Code, an agreement is the moment of meeting between an offer (offer) from one party (offeror) and acceptance (acceptance) from the other party (offeree). This moment is the basis for the emergence of rights and obligations for the parties.
  • Offer (Offer): This is a desire submitted by offeror to offeree for a specific offer. The offeror must have the desire and readiness to be legally bound if the offer is accepted.
  • Acceptance (Acceptance): This is the response or statement of agreement from offeree to offer that was submitted. If offeree agree (accept unconditionally), then an agreement is reached (agreement) and a contract is formed.

How to Accept an Offer?

The procedure for responding (acceptance) can be done by following the instructions that may have been specified by offeror in his offer letter. Clarity regarding what is offered and awareness of the legal consequences are very important. This is in line with Article 1342 of the Civil Code, "If the words of an agreement are clear, it is not permissible to deviate from them by means of interpretation."

Comparison with the Common Law System

When compared to the common lawsystem, the conditions for a valid contract differ slightly in emphasis, although the essence is similar:
  1. There must be an offer (Offer).
  2. There must be acceptance (Acceptance).
  3. The contracting parties must have Capacity.
  4. There must be Consideration (reciprocal performance, something of value that is exchanged).
  5. There is a Lawful Cause (A lawful cause).
  6. There must be Intention to create legal relation (Intention to be legally bound).
Unlike the Civil Code which combines it in "agreement", Common Law explicitly lays down offer and acceptance as separate elements.

When Does an Offer (Offer) Become Effective?

International principles regarding contracts (UNIDROIT Principles of International Commercial Contracts) affirm when an offer becomes binding.
Article 2.1.2 (Principle): A proposal for concluding a contract constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in the case of acceptance. (A proposal for concluding a contract constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in the case of acceptance.)
Article 2.1.3 (Principle): (1) An offer becomes effective when it reaches the offeree. (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. (An offer becomes effective when it reaches the offeree. An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.)
This principle affirms that as long as offer has not been accepted, the offeror can change or cancel it. However, if offer has been accepted (acceptance), a contract has occurred and cannot be simply cancelled. To categorize a statement as offer that will create a contract, experts provide clear criteria. According to Henry R. Cheeseman, there are three important measures:
  1. The offeror must objectively intend to be bound by the offer.
  2. The terms of the offer must be definite or reasonably certain.
  3. The offer must be communicated to the offeree.
A more stringent definition is described by J. Beatson in Anson’s Law of Contract:
An offer is an intimation, by words or conduct, of a willingness to enter into a legally binding contract, and which in its terms expressly or impliedly indicates that it is to becoming binding on the offeror as soon as it has been accepted...

Closing

Understanding the four legal requirements of an agreement according to Article 1320 of the Civil Code—especially the "agreement" process formed from offer and acceptance—is crucial. Failure to meet any of these conditions, whether subjective or objective, may result in the contract being voidable or even null and void.