Reconstruction of the Principle of Good Faith in Modern Trade Agreements in Indonesia

Abstract

The principle of good faith constitutes a central norm in Indonesian contract law, serving as a moral and legal foundation that ensures honesty, fairness, and justice in contractual relations. As codified in Article 1338 paragraph (3) of the Civil Code (KUHPerdata), it requires that agreements be executed in good faith, reflecting the balance between the binding force of contracts (pacta sunt servanda) and ethical considerations in commerce. However, in practice, judicial interpretation of good faith in Indonesia has often been inconsistent sometimes applied as a corrective mechanism to prevent abuse of rights, yet at other times restricted to literal contractual performance. This doctrinal ambiguity has become increasingly problematic amid the rapid transformation of trade relations driven by globalization, digitalization, and cross-border commercial practices.This study employs a normative juridical and doctrinal approach to examine how the principle of good faith is interpreted and applied in modern trade agreements. Through analysis of relevant legislation, judicial decisions, and academic perspectives, the research identifies the evolving meaning of good faith within Indonesia’s dynamic commercial landscape. The findings reveal a need for doctrinal reconstruction to establish a more coherent and adaptive understanding  that integrates both subjective sincerity and objective fairness, while aligning with international standards such as the UNIDROIT Principles and the CISG.The study concludes that the reconstruction of good faith must position it as a living principle of justice, capable of guiding not only traditional contractual relations but also digital and transnational commercial practices. A clearer and more harmonized interpretive framework will enhance legal certainty, promote fairness, and strengthen public trust in Indonesia’s modern trade environmen.