PHASE OF CONTRACT

Not all the contract constitute valid and binding contracts. To establish a valid and binding contract, there are four conditions to be satisfied as follows1: Consent of the Parties, the consent of the parties to enter into a contract constitutes the consensual principle and serves as the basis of contract law. A contract is considered to have consent if approval by the parties is made without duress, mistake or fraud (misrepresentation). Duress involves an illegal mental threat including physical violance (but not an action that is permitted by law to bring as a lawsuit), blackmail and excessive influence over a person in a weakened mental state. Mistakes comprise of two types: concerning the identity of the subject matter of the contract and concerning the identity of the person that concluded the contract. Fraud is defined as a plain act performed by one party prior to the formation of a contract with the intention to deceive the other party and induce him to conclude the contract that he would not have concluded if he was to be aware of the deception. In other words, one party concludes the contract because because of the deceitful act (Budi Harsono, S.H., Cinerama Hukum). Contract may be valid even though consent was obtained by duress, mistake, or fraud. In this case, the contract is considered to be a violable contract, meaning that the contract can be made void but only at law and on the bringing of a successful cause of action by the injured party. The suit has to be filed within five years of the cessation of the duress or within five years of the discovery of the mistake. Capacity of the Parties, the legal capacity of a party to conclude the contract serves as the second important requirement that must be satisfied before a contract can be considered valid. Generally, all persons are legally eligible to enter into contract. Exemption is made to the following persons: a minor (a person under 21 years old, unless married), a person under official custody, and a person prohibited by the relevant law to conclude a contract. Definite/Specific Subject Matter, Third element of a binding contract is the specific subject matter. In general, anything that is tradable and determinable may become an object of a contract. A subject matter of a contract can be comprised of rights, services, or good whether existing now or in the future. Under the Indonesia Civil Code, only existing goods are tradable. Future trading is governed by a separate law (Chapter VI Business Law: Contract
Law).

Termination of Contract Indonesian Contract law recognize ten steps of termianting a contract; namely, by performance, by certified tender, by nivation, by compensation 9set-off), by merger, by release, by destruction of the subject matter, by rescission, by occurence of a cancelling condition, and exceeding any statte of limitation. By performance of contract is the most common way of terminating a contracr, which denots with the word payment. In general, only the party concerned make the payment. However, it is also possible to have a third party to do so. If the third party does this without taking thecreditors place then the contract is terminated, whereas if the third party steps into the sohoes of the creditor, then ot is known as subrogaton. Certified tender plus deposit may discharge the contract in the event the creditor refuses to accept payment. If the debtor wishes to make payment by offering money or movable goods or immovable goods, but the creditor refuses, then such money or goods are to be depositd in the court at the responsibility of the creditor. Novation occurs when the old contract is terminated and a new contract is born. It must be done explicity and requires the consent of both parties. Compensation occurs automatically if someone is simutaneously a creditor and debtor of another person and the contract concerns as a sum of money or certain and similar quantity of goods. Thus no special procedure or intervention of a third party required. Merger is a termination process whereby the position of debtor and creditor unite in one person. This may occur when, for example, the debtor marries the creditor or the debtor becomes the heir of the creditor. Release is a situation in which the creditor release the debtor from any obligation by conclusion of a new contract. The debtor has to accept the creditors offer to free him from the obligation. A contract concerning a delivery of goods is terminated under the following t 1. Pre Contract Stage At the pre-contract the parties will engage in contract bargaining process in g eneral bid (bargaining process). One party offers, while the other gave when he accepted the terms of acceptance - as requested by the first party. Normally this process is also referred to as the negotiation process towards the creation of an agreement (mutual consent). This condition is most important in the civil law. Implies bidding for a contract proposal.

It contains elements of the contract is about to be closed ensensialia. Parties are offered in this offering will acquire the right of the right to accept or reject the offer. Offers received will give birth to a contract. This applies to the agreement that was born since an agreement, such as sale and purchase agreement.

Both offer and acceptance is a declaration of will. In the bargaining process must have the free formation, what is stated, both the supply and acceptance, based on the will or intention really is. As far as it is disclosed voluntarily and with intent that the statement was actually binding. This view is valid, both for the offer (the offeror), as well as for those who were offered (offeree).

However, there are also courses pertaining to the cancellation of the agreement on the basis of disability will, in terms of the proposed statement will contain defects, namely dwalling, bedrog, and dwang. It will include the onset of disability can occur when one party in the negotiation process does not rely on the principle of good faith. In this negotiation phase, respectively - each party has the obligation, of course, it's based on good faith. Ddengan based on good faith, the obligation to check and the obligation to notify. For example in a negotiation about buying and selling homes, prospective buyers must check it - matters relating to official plan dispossession. Sanctions for it is the buyer's obligation not to mengaukan cancellation on the basis of error if the title to the house was lifted. Meanwhile, in the process of negotiation, it is necessary to use good faith which means that the offer or acceptance can not be ditraik or canceled by the way inappropriate manner. An example is made of the Letter of Intent or Memorandum of Understanding. In manufacturing there is also a legal obligation for the parties in good faith. That is, it - it is agreed in the LoI or MoU should be executed, unless the parties want a change or cancellation.

2. Signing Contract Phase Contracts generally contain clauses - clauses that reflect the promise or condition applicable to the parties. Preparation of draft contracts typically delivered in one of the parties upon agreement of both parties. Thereafter, they will continue negotiations

to achieve a final draft to be signed. At this stage there is also a legal obligation of good faith is an obligation to examine all aspects contained in the contract to be signed commonly referred to as "the obligation to exercise due diligence" (Kartini Mulyadi: 1994)

Due diligence is very important to do, not just limited to the identity of the parties, but also all clauses contained in the contract until the closing, which is a signature. In contracts involving identity issues Company Limited is noteworthy aspect relates to the authority of the directors in making and signing a contract. The authority board is possible only after approval is obtained from the commissioner. On this side needs to do research, for example, the charter company in question to determine whether the board of directors is authorized, then the injured party can not sue because ultravires rule on the basis of the doctrine of limited liability that is not personally liable on the principle of joint responsibility.

3. Implementation Phase Contract The implementation phase of the contract is the implementation of the rights and obligations of the parties in accordance with clause agreed in the contract. In this case there is also a principle of good faith, that in this stage involves a limiting function and negate the contractual obligations. This function should not be run just like that but only if there is a very important reason.

Cancellations can only be done if a clause is not acceptable because it is not fair. For example, a case of the Bank Mayaindah Hartono. In this case Hartono as the debtor is in default and the state law to pay debts to creditors, but the judge lowered the interest rate previously agreed upon by the parties to a 39.6% year to 15% per year. The decision gives the ratio decidenci that the provisions regarding the procedures in atat, do not use a process contrary to good faith.

Conclusion Contract is a process that begins with the stage of negotiations (negotiation), signing, and implementation. On each phase of the parties bound by the contract, they has the legal obligation of good faith. The judge has the authority to assess compliance with

those obligations under the principle of propriety and decency (redelijkheid en billijkheid). The authority is used to create the implementation of the rights and obligations of the fair. Principle of good faith in contract phase has also been universally accepted as a universal principle in civil law, law of business contracts nationally, and internationally. For the preparation of a plan that we should adopt a national law with the best in the enforcement of the principle functions at each stage of the contract.

RESUME OF PHASE CONTRACT FIRST STRUCTURAL ASSIGNMENT OF AGREEMENT ARISING FROM CONTRACT

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