Default is a legal term used to describe negligence committed by one of the parties in an agreement involving money.
This term may not be popular enough for most of us. However, it is important for you to know about this term, especially if you make an agreement involving money with another party. So, what is meant by default? Check out the full review in the following article.
1. What is Default
Default is an act of breach of agreement between two parties. When one of the parties is unable to carry out their obligations in accordance with the existing agreement, then this action can be fully considered as a default.
As quoted directly from the Big Indonesian Dictionary (KBBI), what is meant by default is a situation where one party (usually an agreement) performs poorly due to negligence.
Meanwhile, according to the Center for Counseling and Legal Aid of the Ministry of Law and Human Rights of the Republic of Indonesia, default occurs due to non-performance resulting from an error on the part of the debtor, either intentionally or unintentionally.
In the realm of loans, default can occur when the party who borrows is unable to pay the installments according to the time agreed in accordance with the contractual agreement (bad credit).
Default has quite serious consequences for the borrower, such as increasing loan interest, terminating the loan, and taking legal action. Therefore it is important for the debtor to understand the terms and obligations contained in the contract.
2. Default Legal Basis
Default is an action in which a person breaks a promise to a promise he has made with another party. The legal basis for default is regulated in Article 1338 of the Criminal Code which reads, "all agreements made in accordance with applicable laws, become laws for those who make them. The agreement cannot be withdrawn, other than with the agreement of both parties or due to reasons determined by law. This agreement must be executed in good faith.
The other legal basis for default is also regulated in the following article. This article contains the consequences that will be borne by the party who commits a default.
- Article 1243 BW regarding the obligation to compensate for losses suffered by creditors or other parties as a result of one of the parties.
- Article 1267 BW regulates the termination of the contract agreement together with the payment of existing compensation.
- Article 1237 Paragraph (2) BW acceptance of the transfer of risk since the default occurs.
- Article 181 Paragraph (2) HIR regarding the obligation to bear court costs.
3. Causes of Default
There are various factors that cause why a default can occur. Including the following.
3.1. Force Majeure
Keadaan memaksa atau force majeure adalah sebuah kondisi dimana kewajiban atau perjanjian yang ada tidak dapat dipenuhi akibat suatu peristiwa yang terjadi di luar kendali atau kehendak. Misalnya bencana alam, terjadi kecelakaan, dan lain sebagainya. Jika hal ini terjadi, pihak yang bersangkutan tidak dapat disalahkan karena hal tersebut terjadi di luar kehendak.
3.2. One of the Parties
The next cause of default is an error caused by one party and done intentionally or unintentionally so that the other party is harmed by this action.
3.3. Done Intentionally
Default is done intentionally, meaning that the party who commits negligence intentionally violates the terms that have been mutually agreed upon.
4. Element of Default
The following are elements of default that you need to know. Among others, the following.
4.1. Agreement on Stamps
Unsur wanprestasi yang pertama yakni adanya perjanjian di atas materai yang ditandatangani oleh kedua belah pihak. Perjanjian hitam diatas putih tersebut mengindikasikan jika kesepakatan yang ada terdapat kekuatan hukum di dalamnya.
4.2. One Party Commits a Violation
In addition to the existence of a written agreement accompanied by a signature on stamp duty, the next element of default is a violation of the agreement committed by one of the parties. This is included in default because one party is harmed by an existing violation.
4.3. Has been Found Guilty and Continues to Violate Existing Agreements
The last element of default is an unwillingness to make mistakes and the sanctions received. In this case, the offender again makes a mistake and harms the other party.
5. Impact of Default
Basically, default can have a negative impact on both parties. However, there are strict consequences for those who default. Some of the consequences that exist include the following points.
5.1. Obligation to Pay Compensation
In accordance with the rules stated in Article 1246 of the Civil Code, the debtor or party who commits negligence is obliged to pay compensation which includes costs, interest, and other losses that occur.
5.2. Cancellation of Agreement
Second, the cancellation of the agreement between the two parties, so that existing obligations will automatically be abolished.
5.3. There is a transfer of risk
The third impact is the transfer of risk. In accordance with the policy stipulated in Article 1237 of the Civil Code that if the debtor or party to an agreement is negligent in carrying out his obligations, then he must bear all the losses.
6. Example of Default
So that you can understand what a default is more clearly and easily, consider the following examples.
Image Source: pexels/Andrea Piacquadio
6.1. Carry Out Obligations but Not in Accordance with the Agreement
If one party carries out its obligations but the process is not in accordance with the agreement between the two parties. Then the action can be regarded as an example of default.
This is because the fulfillment of existing obligations is not appropriate and can harm other parties.
One example of default is when the debtor returns a number of funds borrowed from the creditor but the nominal given is not in accordance with the agreement that has been made. Therefore the creditor is disadvantaged because of this.
6.2. Late to Keep Promises
The next example of default is a delay in keeping promises. Where one party fails to keep its promise or in other words it is not in accordance with the time available.
For example, a debtor promises to pay off payments at the beginning of April, but in fact, the promise is only fulfilled at the end of April which has exceeded the allotted time.
6.3. Doing Something Prohibited in the Agreement
The agreement is made on the basis of mutual agreement and it states what is prohibited and permissible. A person can be said to have committed an act of default when that person violates an existing agreement, acts, or does something that is prohibited.
One example is violations in renting a place. Where in the agreement made the place may not be used for matters related to crime. But in fact, the tenants actually use the place for narcotics transactions.
6.4. Promises Will Do Something But Not Kept
Default is negligence in acting. When one of the parties is unable to carry out his obligations, in this case fulfilling the promise he has made, then the action is included in the default.
Examples of cases of default on this one are very common in society. There are various factors that cause this to happen. One of them is a lack of a sense of responsibility, inability to fulfill obligations or commitments that have been made, and not wanting to take risks until you change your mind.
Friend BFI, thus the discussion regarding Default is: Definition, Legal Basis, Causes, and Examples. We hope that this article will help you to understand what default is more easily.
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