BREACH OF CONTRACT AND ITS LEGAL CONSEQUENCES

CONTRACT LAW
September 3, 2018
International Humanitarian Law
September 3, 2018

by Ratu Tasya and Nurul Indah P

Breach of contract occurs when one of the parties fails to perform its contractual obligations and the other party has a right to demand the fulfillment of the agreement and to demand performance of those obligations with the help of the authorities.

PT Metro Batavia is one of the leader aircraft company who’s facing an alleged breach of contract against PT Garuda Maintenance Facility (GMF) Aero Asia . Batavia accused the branch company of PT Garuda Indonesia conducting a breach of contract on the reparation of their airplane machines that broken down after 300 hours flight, which was supposed to be guaranteed up to 1.000 hours of flight. Batavia sued GMF for 5 Million US$ (Rp 76 Billion) to Tangerang State Court. In the middle of transaction agreement, Batavia cut a couple of reparation and purchase contracts ties off unilaterally. even though the airplane itself was already done to be taken and this cause a loss up to hundred millions rupiah on the GMF side because of the breach of contract by Batavia. The debt has been expired since the beginning of 2007 but hasn’t been paid until the middle of 2008.

Breach of Contract has its legal consequences in the Indonesian Civil Code, Article 1236-1237 and 1266. As a result of the law of tort for damages, cancellation of the agreement, intermediate risk, and pay court costs. Pursuant to Article 1238 Indonesian Civil Code, The debtor shall be deemed in default, either by an order or other similar deed, or pursuant to the obligation itself, stipulates that the debtor shall be in default, upon failure to deliver within the stipulated time period. And in accordance to Article 1267 Indonesian Civil Code, The party against whom the obligation is not fulfilled may opt to compel the counterparty to fulfill the agreement where such fulfillment is still possible, or demand the termination of such agreement, with compensation of costs, damages and interests.

Their contract is a contract that provide/serve goods, for instance buy and sell, exchange, distribution, rent, lease. Filled in an agreement named Long Term Aircraft Maintenance Agreement Number GMF/PERJ./DT-3046/2003 dated on 16th April 2003 and Amendment Number 1 to Long Term Aircraft Maintenance Agreement Number GMF/PERJ./AMAND-1/DT-3046/03/06 dated on 5th September 2006. According to this long term contract and its amendment, as an airline company has demand service as a reparation and refinement company for aircraft to perform aircraft reparation and/or aircraft treatment and/or sell sparepart and/or rent tools and/or use of labor, with contracts implementations made by both parties in a form of repair order, Customer Work Order, Faximile. Pursuant to this contract both parties had agreed and approved on (1) Work that will be performed by PT GMF (2) Sparepart/tools/goods that will be sold or rented and the use of labor (3) The cost of work and/or the price of the goods and/or the price of rent, and (4) the payment procedure, where it has implemented obligations as required in the contract.

PT Metro Batavia Air had done a breach of contract by didn’t fulfill their payment cost’s obligation as written in the contract, For that PT GMF has filed lawsuit against Batavia. since they didn’t fulfill the obligation to finished the payment in accordance with the long term contract which has been written in the invoice that pass its due by PT GMF to PT Metro Batavia. Therefore, Pursuant to Indonesian Civil Code Article 1267, PT Metro Batavia must pay their debts to fulfill their obligation.

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