Enforceability of contracts executed by using electronic means in Indonesia

1) Is a contract legally enforceable if the parties exchange scanned copies of signed documents by email?

Yes. A contract can generally be legally enforceable even if the parties exchange scanned copies of signed documents by email, provided that the agreement satisfies the requirements for a valid contract under Article 1320 Indonesian Civil Code, namely: (i) there must be consent of the individuals who are bound thereby; (ii) there must be capacity to conclude an agreement (adult or already married and not under conservatorship); (iii) there must be a specific subject-matter (e.g., construction service); and (iv) there must be an admissible cause (not violating laws and regulations, public order, and decency). The four requirements under Article 1320 of the Indonesian Civil Code are also stipulated under Article 46 of Government Regulation of the Republic of Indonesia Number 71 of 2019 on the Implementation of Electronic Systems and Transactions (“GR No. 71/2019”).

2) What requirements must be met for an electronic signature to be considered valid and legally binding?

Based on Article 59 paragraph (3) of GR No. 71/2019, an electronic signature must meet the following requirements in order to have valid legal force and legal consequences:

1. The data for the creation of the electronic signature is linked only to the signer;
2. The data for the creation of the electronic signature at the time of the electronic signing process is only under the control of the signer;
3. Any changes to the electronic signature that occur after the time of signing can be detected;
4. Any changes to the electronic information related to the electronic signature after the time of signing can be detected;
5. There is a certain method used to identify the signer; and
6. There is a certain method to indicate that the signer has given consent to the related electronic information. 

3) Can a contract be executed entirely electronically without a paper original? 

Yes, provided that the contract satisfies the requirements under Article 1320 of the Indonesian Civil Code, Article 46 GR No. 71/2019 and the requirements for electronic signatures as stipulated under Article 59 paragraph (3) of GR No. 71/2019.

4) Are contracts and agreements concluded through online platforms or mobile applications legally enforceable?

Yes. 

5) How can a party prove in court that an electronic document was actually signed by a particular person and that its content has not been altered?

Under Article 11 of ITE Law an electronic signature has legal force and evidentiary consequences if it meets the statutory requirements as stated in the Article 59 paragraph (3) of GR No. 71/2019 as we have outlined in Number 2 above. 

Article 60 paragraph (2) of GR No. 71/2019 stipulates that there are 2 (two) types of electronic signature, namely certified electronic signature and uncertified electronic signature. For certified electronic signature, it must:

1. Fulfill the validity requirements of legal force and legal effect of electronic signature as set out in Article 59 paragraph (3) GR No. 71/2019;
2. Use an electronic certificate issued by an Indonesian Electronic Certification Provider (“ECP”); and
3. Be created using a certified electronic signature Creation Device.

Whilst an uncertified electronic signature is created without using the services of an ECP. The legal consequences of using a certified or uncertified electronic signature affect its evidentiary value.

In order to obtain stronger and more reliable evidentiary value, it is advisable for the parties to a contract to use a certified electronic signature. A certified electronic signature allows the signatory’s identity to be verified through an Electronic Certificate issued by a recognized ECP. The results of this verification by ECP can be presented as evidence in court. 

The final draft and executed version can be compared to prove whether they are identical or different than the contract intended to be executed at the first place.

6) Can a contract be considered validly executed if one or both parties sign it using a facsimile signature?

Yes, provided that the contract meets the validity requirements for agreements under Article 1320 of the Indonesian Civil Code and Article 46 GR No. 71/2019. 

7) In what circumstances does the law require a specific form of signature or a paper original despite the possibility of executing the contract electronically?

Article 5 paragraph (4) of the ITE Law provides that the provisions on electronic information and/or electronic documents do not apply where otherwise provided by law. 

For example, under the land regulations, the transfer of land rights and ownership rights over condominium units through sale and purchase, exchange, grant, contribution of assets to a company, and other legal acts of transfer, except for transfers through auction, may only be registered if evidenced by a deed executed by an authorized Land Deed Official (PPAT) in accordance with the prevailing laws and regulations. The execution of such deed must be attended by the parties carrying out the relevant legal act and witnessed by at least two (2) persons who meet the requirements to act as witnesses to such legal act. Therefore, with respect to the transfer of land rights, such as sale and purchase cannot be conducted electronically and must instead be documented in a deed executed before an authorized PPAT.

8) What risks should businesses consider when using electronic methods to execute and sign contracts?

1. Data security and confidentiality risk, electronic execution may expose contracts, credentials, and other confidential information to risks of unauthorized access or data breaches.
2. Validity and enforceability risk, the electronic signature and the execution process should comply with the requirements under applicable Indonesian laws and regulations to ensure that the contract is valid and enforceable. To mitigate this risk, businesses are advised to use a certified electronic signature in accordance with applicable Indonesian laws and regulations.
3. Risk of Unauthorized Signatory, there is a risk that the person signing the contract is not the actual authorized signatory, particularly where an account, credential, or electronic signature is compromised.

9) Which types of contracts cannot safely be executed entirely electronically?

Under Indonesian law, there is no specific type of contract that is considered unsafe by its nature to execute by electronic signature. Any contract, except for those expressly excluded by applicable laws and regulations as described in Point 7 above, may generally be executed electronically. 

10) Who bears the risk if an account or electronic signature is compromised and a third party signs the contract?

Article 12 of the ITE Law stipulates that every person involved in electronic signatures is obligated to ensure the security of the electronic signatures they use, which must include at a minimum, among others, measures to prevent unauthorized access by third parties, and the signer must exercise due care to prevent the unauthorized use of data related to the creation of electronic signatures. Any person who commits a violation is liable for all losses and legal consequences that arise.

Thus, the person held responsible is the one who is proven to have violated security protocols or been negligent in protecting the security of their electronic signature.

Authors: Eddy Leks and Fitri Nabilla