Default: Types, Examples, and Differences with Unlawful Acts

In the realm of civil law, understanding the concept of default is crucial, particularly for those involved in contracts or agreements. Default forms the basis of many contractual disputes where one party fails to fulfill their obligations as agreed. By understanding what default is, readers can more easily identify potential breaches of agreements. Additionally, this understanding helps minimize the legal risks that may arise from being in default due to negligence or non-fulfillment of obligations in the agreements made.

What is Default?

Default is a term in civil law that refers to the failure or negligence of one party in an agreement to fulfill their obligations as agreed upon in the agreement. This term is important to understand as it forms the basis of many contractual disputes in legal practice. In the context of Indonesian law, default is regulated in the Civil Code, specifically Article 1243, which states:

“Compensation for costs, losses, and interest due to non-fulfillment of an obligation shall only be required if the debtor, after being declared negligent in fulfilling their obligation, still fails to fulfill it, or if something that must be given or done can only be given or done within the already elapsed period.”

In other words, default occurs when one party fails to perform their obligations according to the agreement and, after being given a warning or additional opportunity, still does not fulfill those obligations.

Types of Default

In civil law, there are three main types of default:

Failure to Perform Obligations
This type of default occurs when one party completely fails to perform the agreed obligations in the agreement. A common example is when a seller does not deliver the goods paid for by the buyer according to the agreement.

Late Performance of Obligations
This default type occurs when the party bound by an agreement performs their obligations but not within the agreed time frame. For instance, a contractor does not complete the construction within the specified time frame in the agreement.

Improper Performance of Obligations
This default type occurs when the party bound by the agreement performs their obligations but not according to the agreement. For example, a seller delivers goods of different quality or specifications from what was agreed upon.

Other than the 3 (three) main types of default above, the performance of acts prohibited in an agreement (or violation of the negative covenants in the agreement) is also a type of default. It may occur when the party bound by the agreement performs actions that are explicitly prohibited in the agreement. For example, in a restaurant franchise agreement between A as the franchisor and B as the franchisee, a clause prohibits B from sharing or disclosing the secret recipe. If B shares or discloses the recipe to a third party, this action is considered a default.

Wanprestasi

or Unlawful Acts

In practice, people often confuse default and torts, which is known as “unlawful acts” or Perbuatan Melawan Hukum (PMH) in Indonesia. However, a clear understanding of these different concepts is essential because they bring different legal consequences. The table below highlights the differences between default and unlawful acts.

Aspect	Default	Unlawful Acts
Definition	Default is the failure or negligence to fulfill obligations agreed upon in a contract.	An act that violates the law and causes damages to others, creating liability on the person causing the damage to compensate for the damage.
Scope	Default occurs within a contractual relationship where both parties have agreed to fulfill certain obligations. This includes failure to perform, late performance, improper performance, and performing prohibited acts.	Unlawful acts include all actions violating the law that harm others, whether intentional or unintentional, such as defamation, fraud, or embezzlement.
Source of Obligation	The obligation violated originates from an agreement or contract agreed upon by the parties.	The obligation violated originates from general law or legislation, not an agreement.
Legal Consequences	The injured party in default can demand fulfillment of contractual obligations, compensation, or agreement cancellation. The consequences or sanctions for default are stated in Article 1329 of the Civil Code.	The injured party in an unlawful act can claim compensation based on Article 1365 of the Civil Code. The legal consequences of unlawful acts are not only financial compensation but may also include orders to stop the unlawful act or restore the situation to its previous state.
Proof	The injured party must prove the existence of a valid agreement, the obligations specified in the agreement, and the negligence or failure of the other party to fulfill those obligations.	The injured party must prove the existence of an unlawful act, the damage suffered, and the causal relationship between the act and the damage.
Required Elements	· Existence of an agreement; · A party in breach of the agreement; · Has been declared negligent, yet still does not perform the contract.	· Existence of an unlawful act; · Existence of damage; · Causal relationship between the damage and the unlawful act; · Fault.

Understanding the concept of default and its differences with unlawful acts is crucial in managing and avoiding contractual disputes. With a good understanding of these two concepts, individuals and businesses can be better prepared to face potential legal conflicts and protect their rights.

For further information or consultation on this matter, please contact us at ADCO Law.

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Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.