Background
Despite of many risks that may happen in the sale and purchase of goods, hidden defect is one of the major risks that must be considered by the buyer, even before the buyer decides to purchase the goods. Hidden defect is mostly found after the sale and purchase of goods. Therefore, having a well sale and purchase agreement can be one of the solutions to mitigate this risk. Although the Indonesian Civil Code stipulates the provisions of hidden defect as will be explained below, the parties however may stipulate a special agreement to regulate provisions on the presence of hidden defect.
Principle Provisions of Hidden Defect
In principle, the seller is obliged to warrant the buyer against hidden defect in the goods sold, which makes the goods are unfit for what they were intended, or diminish their usefulness, so if the buyer has known that such defect, he would not bought the goods or would bought them with a lower price. The seller is responsible for the hidden defect, although he did not know the presence of such defect. The seller however is not responsible for the hidden defect, if (a) the parties agreed that the seller shall not be obliged to warrant anything, or (b) the defect was apparent to the buyer.
Buyer’s Option on Presence of Hidden Defect
The Indonesian Civil Code stipulates options to the buyer on the presence of hidden defect, as follows:
Option I:
- returning the good to the seller; and
- demanding the seller to refund the purchase price.
Option II:
- still having the good; and
- demanding the seller to refund part of purchase price, as will be decided by the judge after hearing an expert.
If the seller knew the presence of hidden defect in the goods sold, then other than the obligation to refund the purchase price as mentioned above, the seller shall also compensate the buyer towards all costs, losses and interests. If the seller did not know the presence of hidden defect, then he only needs to refund the purchase price and also compensate the buyer on any cost occurred to carry out the purchase and delivery of goods (if it is paid by the buyer).
In the event that the goods sold are destroyed as a result of hidden defects, then all damages shall be borne by the seller. Other than the damages, the seller shall also refund the purchase price, including compensating the buyer towards all costs, losses and interests.
Period of Claim on Hidden Defect
Under Article 1511 of Indonesian Civil Code, the buyer must claim the hidden defect immediately in a short time. The meaning of short time period can be seen in Article 1454 of Indonesian Civil Code, which states, if a claim for cancelation of agreement is not regulated specifically under the specific laws and regulations, then the period shall be 5 (five) years. Therefore, the claim of hidden defect shall be made at the latest 5 (five) years since the buyer knows the presence of hidden defect. If the buyer does not file the claim during that period, then the claim can be considered expired.
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