Agents and Principals

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An agency or mandate relationship arises anytime one person, the principal, grants authority to another person, the agent, to act for and on behalf of the principal.

Principal-agent relationships are very common relationships in business. Directors and commissioners of limited liability companies are agents of their companies. Partners in general partnerships, and managing partners in limited partnerships, are agents of their companies. The employment relationship is an agency relationship.

However, an agent need not be a director, commissioner, partner or employee of its principal. For instance, a principal may appoint and authorize an agent to conduct certain acts for the principal, such as in the case of a real estate agent who markets a house for sale, or an immigration agent who coordinates immigration requirements for its principal.

Governing Law
Agencies (kuasa), or mandates (pemberian kuasa), are governed generally by the Indonesian Civil Code. (Arts. 1792 through 1819 of the Indonesian Civil Code (Kitab Undang-undang Hukum Perdata) (Burgerlijk Wetboek voor Indonesië) (Staatsblad 1847:23) (“ICC“)). There are other areas of Indonesian law that also regulate various agency relationships and the reader should be aware of the necessity to review all law relevant to a particular agency relationship to ensure compliance with law as well as to avoid surprises arising out of unseen restrictions and liabilities created by law.

Nature of Agencies
The Civil Code defines mandates (pemberian kuasa) as agreements (persetujuan) that contain (berisikan) a grant (pemberian) of authority (kekuasaan) to another person (orang lain) who accepts (menerimanya) that grant of authority to implement (melaksanakan) something (sesuatu) on behalf (atas nama) of the person who grants that authority. (Art. 1792 of the ICC).

Mandates may (dapat) be granted (diberikan) and accepted (diterima) by:

  1. a notarial deed (akta umum);
  2. a document signed under hand (surat di bawah tangan);
  3. a letter (sepucuk surat); or
  4. orally (lisan). (Id. at Art. 1793).

The acceptance (penerimaan) of a mandate (kuasa) may also be tacit (diam-diam) and concluded/surmised (disimpulkan) from the performance (pelaksanaan) of the mandate by the person granted the authority (yang diberi kuasa itu). (Id.).

Grants (pemberian) of mandates arise (terjadi) gratuitously (cuma-cuma), except if otherwise agreed (diperjanjikan sebaliknya). (Id. at Art. 1794).

In the event remuneration (upahnya) is not expressly (tidak tegas) stipulated (ditentukan), an agent (penerima kuasa) may not (tidak boleh) request (meminta) remuneration which is more than three percent from all revenue (pendapatan), two percent from all expenditures (pengeluaran), and one and ½ percent from the capital they receive (modal yang mereka terima). (Id. at Arts. 411 and 1794).

Specific and General Mandates
Mandates (pemberian kuasa) may be implemented (dapat dilakukan) in a specific manner (secara khusus) concerning one or more specific interest (kepentingan tertentu), or in a general manner (secara umum) encompassing (meliputi) all (segala) of the interests (kepentingan) of a principal (pemberi kuasa). (Art. 1795 of the ICC.

Mandates formulated (dirumuskan) in a general manner (secara umum) only encompass (meliputi) actions (tindakan-tindakan) which relate (menyangkut) to management (pengurusan). (Id. at Art. 1796). For transfers/alienations (memindahtangankan) of things (barang) including real estate or attachments (meletakkan) of encumbrances such as hypothecations (hipotek) or mortgages (hak tanggungan), for making (membuat) settlements (suatu perdamaian) or conducting (melakukan) other acts (tindakan lain) which may only be conducted by an owner (seorang pemilik), an express (kata-kata yang tegas) mandate is required (diperlukan). (Id.).

Scope of Authority
An agent (penerima kuasa) may not undertake (melakukan) anything which falls outside of the scope (melampaui) of its mandate (kuasanya). (Id. at Art. 1797). Authority granted to settle a case amicably (secara damai) does not encompass (mengandung) the right (hak) to render the settlement (penyelesaian) of that case to be dependent (menggantungkan) on a decision (keputusan) of an arbitrator or judge (wasit). (Id.).

A minor (anak yang belum dewasa) may (dapat) be appointed (ditunjuk) to become an agent (kuasa); but the principal (pemberi kuasa) cannot (tidak berwenang) submit (mengajukan) a legal claim (tuntutan hukum) against the minor other than to the limited extent permitted by provisions of law (ketentuan-ketentuan umum) concerning obligations (perikatan-perikatan) which are made by minors. (Id. at Art. 1798).

Claims against Third Parties
A principal (pemberi kuasa) may submit claims (menggugat) directly (secara langsung) against persons with whom its agent (penerima kuasa) has already conducted (melakukan) legal acts (perbuatan hukum) in the agent’s capacity as an agent (kedudukannya) and also may submit (mengajukan) claims (tuntutan) against those persons (kepadanya) for the fulfillment (memenuhi) of agreements (persetujuan) which have already been made (telah dibuat). (Id. at Art. 1799).

Responsibilities of Agents
An agent (penerima kuasa), so long as (selama) its mandate (kuasanya) has not yet been revoked (belum dicabut), is obligated (wajib) to implement (melaksanakan) its mandate and is liable (bertanggung-jawab) for all (segala) expenses (biaya), losses (kerugian) and interest (bunga) that arises (timbul) due to the non-performance (tidak dilaksanakannya) of its mandate. (Art. 1800 of the ICC).

An agent (penerima kuasa) is not only (tidak hanya) liable (bertanggung-jawab) for acts (perbuatan-perbuatan) that are conducted (dilakukan) intentionally (sengaja), but also for negligence (kelalaian-kelalaian) which is committed (dilakukan) in the performance (menjalankan) of its mandate. (Id. at Art. 1801). However, the liability (tanggung-jawab) for negligence (kelalaian-kelalaian) of a person (orang) who gratuitously (cuma-cuma) accepts (menerima) a mandate (kuasa) is not as burdensome (tidaklah seberat) as the liability that may be requested (diminta) from a person who accepts a mandate with the procurement (mendapatkan) of remuneration (upah). (Id.).

An agent (penerima kuasa) is required (wajib) to provide (memberi) reports (laporan) to its principal (pemberi kuasa) concerning that which it has already done (apa yang telah dilakukan) as well as to account (perhitungan) concerning all of the things (segala sesuatu) which have been received by the agent (diterimanya) on the basis (berdasarkan) of the agent’s mandate (kuasanya), even though that which is received (sekalipun apa yang diterima) does not have to be paid (tidak harus dibayar) to the principal (pemberi kuasa). (Id. at Art. 1802).

An agent (penerima kuasa) must pay (membayar) interest (bunga) on any principal money (uang pokok) the agent uses (dipakainya) for the agent’s personal needs (keperluannya sendiri) calculated (terhitung) from the moment (saat) the agent commences (mulai) use (memakai) of that money, as well as (begitu pula) interest (bunga) on money that must be transferred (diserahkan) on the closing of accounts (penutupan perhitungan) calculated (terhitung) from the moment the agent is declared (dinyatakan) negligent (lalai) in the implementation (melakukan) of the mandate. (Id. at Art. 1805).

An agent (penerima kuasa) who has already provided information (memberitahukan) in a lawful manner (secara sah) concerning the existence of a mandate (hal kuasa) to a person with whom the agent makes (mengadakan) an agreement (persetujuan) in the agent’s capacity (kedudukan) as an agent (penerima kuasa) is not liable (tidak bertanggung jawab) for that which occurs outside of the scope (terjadi di luar batas) of that mandate except if the agent binds (mengikatkan) itself (diri) personally (secara pribadi) to that. (Id. at Art. 1806).

An agent (penerima kuasa) is responsible (bertanggungjawab) for other persons (orang lain) who are appointed (ditunjuknya) as the agent’s substitutes (sebagai penggantinya), also known as sub-agents, in the implementation of its mandate if:

  1. a mandate to appoint (kuasa untuk menunjuk) another person as a substitute (penggantinya) is not provided (tidak diberikan); or
  2. a mandate to appoint a substitute is granted (diberikan) without mentioning (menyebutkan) a specific person (orang tertentu) while (sedangkan) the person who is chosen (dipilihnya) turns out (ternyata) to be a person who does not have the capacity (cakap) or is not competent/capable (mampu). (Id. at Art. 1803).

A principal (pemberi kuasa) is always (senantiasa) deemed (dianggap) to have granted (memberi) authority (kuasa) to an agent (penerima kuasa) to appoint another person as the agent’s substitute (penggantinya) for the management (mengurus) of goods (barang-barang) that are present (berada) outside of the territory of Indonesia (di luar wilayah Indonesia) or outside of the island of residence of the principal (pemberi kuasa). (Id.).

A principal (pemberi kuasa), in all events (dalam segala hal), may submit claims (mengajukan tuntutan) directly (secara langsung) to the person who have already been appointed (ditunjuk) by an agent (penerima kuasa) as his/her substitute (penggantinya). (Id.).

Multiple Agents
If within one deed (akta), more than one (beberapa) agent (penerima kuasa) is appointed (diangkat) for one matter (urusan), then joint and several obligations (perikatan tanggung-menanggung) do not arise (tidak terjadi) except if that matter is expressly stipulated (ditentukan dengan tegas) in the deed (akta). (Id. at Art. 1804).

Responsibilities of Principals
A principal (pemberi kuasa) is obligated (wajib) to fulfill (memenuhi) the obligations (perikatan-perikatan) made (dibuat) by its agent (penerima kuasa) according to the mandate (kekuasaan) that has been granted (berikan) to the agent. (Art. 1807 of the ICC).

A principals (ia) is not bound (tidak terikat) for that which has been done (telah dilakukan) beyond the scope (di luar) of its mandate (kuasanya) except if the principal has already agreed (menyetujui) to that matter in an express or tacit manner (secara tegas atau secara diam-diam). (Id.).

A principal (pemberi kuasa) is obligated (wajib) to reimburse (mengembalikan) cash advances (persekot) and expenses (biaya) that have been disbursed (dikeluarkan) by an agent (penerima kuasa) for the implementation (melaksanakan) of a mandate, as well as paying (membayar) remuneration (upahnya) if remuneration has already been agreed upon (diadakan perjanjian). (Id. at Art. 1808).

If an agent (penerima kuasa) does not act negligently (tidak melakukan suatu kelalaian), then a principal (pemberi kuasa) may not avoid/evade (menghindarkan diri) the obligation (kewajiban) to reimburse (mengembalikan) the cash advances (persekot), expenses (biaya) and payment of the remuneration (upah) aforementioned, even though (sekalipun) the agent (penerima kuasa) was not successful (berhasil) in that affair (urusannya). (Id.).

Additionally (begitu pula), a principal (pemberi kuasa) must provide (memberikan) compensation (ganti-rugi) to an agent (penerima kuasa) for losses (kerugian-kerugian) suffered (dideritanya) at the time (sewaktu) of the performance (menjalankan) of the mandate (kuasanya), provided that in that matter (asal dalam hal itu), the agent (penerima kuasa) has not acted (tidak bertindak) with insufficient care (kurang hati-hati). (Id. at Art. 1809).

A principal (pemberi kuasa) must pay (harus bayar) interest (bunga) on a cash advance (persekot) that has already been disbursed (dikeluarkan) by an agent (penerima kuasa) calculated (terhitung) commencing on the day (mulai hari) of disbursement (dikeluarkannya) of the cash advance. (Id. at 1810).

If an agent (penerima kuasa) is appointed (diangkat) by various (berbagai) persons to take care (menyelenggarakan) of an affair (suatu urusan) that must be completed (harus mereka selesaikan) in a joint manner (secara bersama), then each of them (masing-masing dari mereka) is liable (bertanggung jawab) for the entirety (seluruhnya) in relation to the agent (penerima kuasa) concerning all of the effects of the grant of that mandate. (Id. at Art. 1811).

Rights of Retention
An agent (penerima kuasa) is entitled (berhak) to hold/retain (menahan) the property (kepunyaan) of a principal (pemberi kuasa) that is in his/her possession (berada di tangannya) until (hingga) the agent is paid (kepadanya dibayar lunas) all that may be claimed by the agent as a result of the grant of the mandate. (Id. at Art. 1812).

Grants (pemberian) of mandates (kuasa) end (berakhir) upon:

  1. the revocation/withdrawal (penarikan kembali) of the mandate by the principal (pemberi kuasa);
  2. the giving of notice (pemberitahuan) of the discontinuation/resignation (penghentian) of the mandate by the agent (penerima kuasa); or
  3. the death (meninggalnya), guardianship (pengampuan) or bankruptcy (pailitnya), whether of the principal (pemberi kuasa) or the agent (penerima kuasa). (Art. 1813 of the ICC).

A principal (pemberi kuasa) may revoke/withdraw (menarik kembali) a mandate if desired (dihendakinya) and may insist (memaksa) that holders of the mandate (pemegang kuasa) return (mengembalikan) the mandate if there are reasons for that. (Id. at Art. 1814).

The revocation/withdrawal (penarikan) of a mandate (kuasa) that is only notified (diberitahukan) to the agent (penerima kuasa) may not be used against third parties (pihak ketiga) who have already made agreements (mengadakan persetujuan) with the agent (penerima kuasa) with lack of knowledge (karena tidak mengetahui) of the revocation/withdrawal of that mandate; without limiting (tidak mengurangi) legal claims (tuntutan hukum) from the principal (pemberi kuasa) against (terhadap) the agent (penerima kuasa). (Id. at Art. 1815).

The appointment (pengangkatan) of a person (seseorang) as a new agent (penerima kuasa baru) to perform (menjalankan) the same affair/matter (suatu urusan yang sama) causes (menyebabkan) the revocation/withdrawal (ditariknya kembali) of the mandate of the first agent (penerima kuasa yang pertama) calculated (terhitung) starting on the day (mulai hari) notice is given (diberitahukannya) of that appointment (pengangkatan itu) to the first agent (penerima kuasa yang pertama). (Id. at Art. 1816).

An agent (pemegang kuasa) may free/release him/herself (membebaskan diri) from the mandate with the provision of notice (memberitahukan) of the agent’s discontinuation/resignation (penghentiannya) to the principal (pemberi kuasa). (Id. at Art. 1817). However (akan tetapi), if the provision of this notice of discontinuation/resignation (pemberitahuan penghentian), whether because the agent does not observe (tidak mengindahkan) time (waktu) or because of another matter resulting (akibat) from the fault (kesalahan) of the agent itself (pemegang kuasa sendiri), brings (membawa) loss (kerugian) to the principal (pemberi kuasa), then the principal (pemberi kuasa) must be provided (harus diberikan) with compensation (ganti rugi) by the agent (pemegang kuasa itu), except if (kecuali bila) the agent was not capable/competent (tak mampu) to arrange/manage/take care of (meneruskan) that mandate without incurring (mendatangkan) material/significant loss (kerugian yang berarti) to itself. (Id.).

If an agent (pemegang kuasa) does not know (tidak tahu) of the death (meninggalnya) of the principal (pemberi kuasa) or of another matter (suatu sebab lain) that causes/results in (menyebabkan) the end/termination (berakhirnya) of the mandate, then the actions (perbuatan) that are done (dilakukan) in the circumstance/condition (keadaan) of lack of that knowledge (tidak tahu itu) are valid/lawful (sah). (Id. at Art. 1818). In that event (dalam hal demikian), all obligations (segala perikatan) undertaken (dilakukan) by the agent (penerima kuasa) with a third party (pihak ketiga) in good faith (beritikad baik) must (harus) be fulfilled (dipenuhi) toward the third party (terhadapnya). (Id.).

If an agent (pemegang kuasa) dies (meninggal dunia), then the agent’s heirs (para ahli warisnya) must (harus) provide notice (memberitahukan) of that matter to the principal (pemberi kuasa) if they know of the grant (pemberian) of that mandate, and at the same time (sementara) take (mengambil) actions (tindakan-tindakan) are required (perlu) in accordance with the circumstances/situation (keadaan) for the interests (bagi kepentingan) of the principal (pemberi kuasa), subject to liability for compensation (mengganti) of expenses (biaya), losses (kerugian) and interest (bunga), if there are grounds for that. (Id. at Art. 1819).

Agent’s create liabilities for their principals. Thus, it is important to chose competent agents, to define the authorities granted with sufficient limitations and to understand how to terminate agents in the event the need arises.
Agents also incur expenses and thus must ensure that, in accepting an appointment, the principal is capable of fulfilling its obligations to the Agent.


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