Definition of Online Contract and its Legal Foundations


In the modern digital era, technology development has progressed very rapidly that it is eventually able to give birth to new information and communication infrastructure that makes our work more effective and efficient. Many companies and businesses are starting to take advantage of the latest technology marvels and the internet to support their business. As is currently the case, various new startups have also emerged, ranging from hotel check-in startups, transportation, to online contract making services.

Along with the development of digital technology, business activities also experience gradual development from time to time, both in terms of traded commodities and the trading mechanism itself. With the development of digital technology in today’s business industry, what is called electronic commerce or better known as e-commerce has proliferated everywhere. This time, both the seller and the buyer no longer have to meet face to face directly as they do it straight through the internet. As a result, the availability of these contracts or e-contracts is now commonplace.

Online contracts are contracts or agreements made and approved via digital devices with the consent of the parties involved without using any form of physical media. Similarly, this agreement is also known as an electronic contract. In Indonesia, many entrepreneurs and organizations have taken advantage of this type of contract, because it is considered faster and easier without having to hold a physical meeting. The main features of this contract are as follows:

  1. Can be made or held remotely and can even exceed the boundaries of a country via the internet;
  2. Parties involved in these contracts do not need to meet face-to-face and may not even need to meet physically at all.

If so, what is the status of these contracts according to the law in Indonesia? In the Law No. 11 of 2008 on Information and Electronic Transactions, Article 1 number 17, as amended by Law No. 19 of 2016 on Information and Electronic Transactions (UU ITE/ITE Law), it is stated in Article 1 number 17 that online contracts enjoy a special form of protection under this law. Furthermore:

“Electronic Contract is an agreement of the parties made through the Electronic System.”

Meanwhile, according to Article 1 Point 5, the electronic system itself is a series of electronic devices and procedures that function to prepare, collect, process, analyze, store, display, announce, transmit, and/or disseminate electronic information.

Furthermore, Article 18 of the ITE Law mentions the procedures for using the electronic agreement/contract, namely:

  1. Electronic Transactions set forth in Electronic Contracts are binding on the parties;
  2. The parties have the authority to choose the applicable law for the international Electronic Transactions they make;
  3. If the parties do not make a choice of law in international Electronic Transactions, the applicable law is based on the principles of International Civil Law;
  4. The parties have the authority to establish court forums, arbitrations, or other alternative dispute resolution institutions that are authorized to handle disputes that may arise from international Electronic Transactions they make;
  5. If the parties do not make the choice of forum as referred to in paragraph (4), the determination of the authority of a court, arbitration, or other alternative dispute resolution institution authorized to handle disputes that may arise from the transaction, is based on the principles of International Civil Law.

The advantages or advantages of these contracts are as follows:

  1. Contracts are executed quickly and efficiently;
  2. Less costs than conventional contracts;
  3. Contract decisions can be accepted immediately;
  4. The agreement format is already available in written form and easily fillable;
  5. Payments for goods or objects that are approved are received more quickly;
  6. The results of the agreement are received more faster;
  7. With the existence of quite sophisticated technology, documents that are accidentally or accidentally deleted can be tracked and restored.

Despite the advantages of these contracts, they do have several disadvantages, including:

  1. Difficulty in tracing the first party or debtor in the event of a default;
  2. Less efficient in terms of communication;
  3. Electronic contracts are prone to be duplicated or forged which makes it difficult to distinguish the original;
  4. The contracts as transaction proofs are under risk for being able to be falsified and problems may arise regarding the authenticity of these contracts.

Nonetheless, an online contract remains an efficient kind of contract to do in today’s digital era. Various considerations based on different business needs are needed for companies when deciding to use this form of contract to avoid losses that may occur if it is not in accordance with business conditions.

Reference :



Photo source: