Redifining the Principle of Consumer Contract to Maximize

Consumer Protection: Elaboration on Product Liability Principle

Rizky Amalia,

Erni Agustin,

Faizal Kurniawan

Faculty of Law, Universitas Airlangga, Indonesia

Keywords: Consumer, commercial, contract, liability, protection.

Abstract: Basically, the law of contract follows the freedom of contract principle that the parties may determine the

substance and the form of the contracts, on the condition of not violating the Laws, morality, and public order.

However, in order to provide consumer protection, the regulation in Indonesia prohibits the businesses to

include exoneration clauses in consumer contracts; specially to avoid the liability when there is defective

products. In Indonesia, their claims are filed and processed in Consumer Dispute Settlement Institution

(BPSK) that shall handle consumer cases only, whereas, commercial contract shall be enforced through the

corridor of contract law principles. This shows that there is an overlap between the instruments of consumer

law and contract law. Normatively, consumer protection in Indonesia is stipulated in The Law Number 8 Year

1999 on Consumer Protection. This paper discusses the scope of consumer contracts, the regulation and the

law enforcement. It also elaborates the concept of consumer and the principle of product liability provided in

Indonesian regulation compared to the Consumer Rights Directive 2011/83/EU on Consumer Protection.

1 INTRODUCTION

The science and technology development and the

rapid competition in the world of trade have occurred

on a national and international scale and have a

significant influence with the demands of legal

protection for consumers who are considered weak in

trade transactions. Consumer losses are generally

divided into two, namely losses caused by the

behavior of business actors who are irresponsibly

detrimental to consumers and consumer losses that

occur as a result of unlawful acts committed by third

parties, making the misled consumers ultimately

harmed (Ahmad Ramli, 2002). Indonesian

government through the promulgation of Law

Number 8 of 1999 concerning Consumer Protection

(hereinafter referred to as “Law No. 8/1999”) on

April 20, 1999 demonstrates its commitment to

provide legal protection instruments to consumers.

The main parties in consumer protection are

consumers themselves. The literal translation from

“consumers” comes from “consumer” or

“consument”, meaning everyone who uses goods /

services for a specific purpose (Az Nasution, 2000).

Consumers are not only interpreted as individuals

(people), but also a company that becomes the last

buyer or user (Erman Rajagukguk, 2000). The extent

of “consumer” wide determination is described

simply by the former President of the United States,

John F. Kennedy, stating that “consumers by

definition include us all” (Mariam Darus

Badrulzaman, 1990). Thus, the term consumer can be

broadly defined as anyone who uses goods / services

for a specific purpose. Determining from the purpose

of the use of goods / services, consumers can be

divided into intermediate consumer, intermediate

buyer, derived buyer, consumer of industrial market

dan ultimate consumer, ultimate buyer, end user, final

consumer, consumer of the consumer market) Az

Nasution, 2000). Article 1 number 2 of Law No.

8/1999, defines consumers, namely every person who

uses goods and / or services, which are available in

the community, both for the benefit of them, their

families, other people and other living things and not

for trading (Sidharta, 2006). Such a definition can

also be found in Article 236 of Book 6 Nieuw

Burgerlijk Wetboek (NBW) which states that

consumers are “een natuurlijk person die niet handelt

in de uitoefening van zijn beroep of bedriijf” which

means a natural person who acts not in his profession

or business.

In the practice of countries in Europe, the

regulation of consumer protection can be found in

Amalia, R., Agustin, E. and Kurniawan, F.

Rediﬁning the Principle of Consumer Contract to Maximize Consumer Protection: Elaboration on Product Liability Principle.

DOI: 10.5220/0010052904050410

In Proceedings of the International Law Conference (iN-LAC 2018) - Law, Technology and the Imperative of Change in the 21st Century, pages 405-410

ISBN: 978-989-758-482-4

405

Directive 85/374 / EEC on Liability for Defective

Products which was subsequently amended through

Directive 1999/34 / EC; Directive 86/653 / ECC on

Self-Employed Commercial Agents; Directive 93/13

/ EEC on Unfair Terms in Consumer Contracts;

Directive 99/44 / EC on Sale of Consumer Goods;

Directive 97/7 / EC on the Protection of Consumers

in Respect of Distance Contracts; Directive 85/577 /

EEC to protect consumer respect contracts are

negotiated away from business premises; and

Directive 2011/83 / EU on Consumer Rights. The

provisions in Directive 85/374 / EEC on Liability for

Defective Products which were subsequently

amended through Directive 1999/34 / EC are

provisions in Europe that specifically regulate

product liability. This paper will discuss about the

scope of consumer contracts, the regulation and the

law enforcement by also elaborating the concept of

consumer and the principle of product liability

provided in Indonesian regulation compared to the

Consumer Rights Directive 2011/83/EU on

Consumer Protection. The assessment is carried out

by comparing the rules of national law with the rules

of other countries, so that a comprehensive analysis

of these problems can be concluded.

2 MATERIAL AND METHODS

This study is a normative legal research, which is a

process to find the legal regulations, principles, as

well as doctrines to provide solutions to the legal

issues encountered. The produced results are

expected to give prescription for the issues

highlighted in this study. As a normative legal study,

statute and conceptual approaches were used. Legal

research was conducted to seek solutions to the

arising legal matters and the aimed results are to give

prescription for the issues at hand. This study

requires primary and secondary legal materials. The

primary legal materials consist of authoritative legal

materials, meaning they cover the laws and

regulations, official notes or treaties in the formation

of the laws and regulations and courts’ decisions.

Meanwhile, the secondary legal materials used in this

research are scientific writings of the

scholars/academicians, results from past research,

encyclopedias, scientific journals and daily or

periodical publications (the media) in the field of law,

as well as seminar papers.

3 THE SCOPE OF CONSUMER

CONTRACTS, THE

REGULATION AND THE LAW

ENFORCEMENT

Consumer contracts and transactional contracts are

one type of contract in which the contract emphasizes

the principle of justice based on the balance of the

interests of the parties UNIDROIT, 1994). The debate

about whether or not there is a balance of party

positions (bargaining power) is basically not relevant

to be associated with commercial contracts, because

the dimensions of commercial contracts emphasize

more on partnership and business continuity

(efficiency and profit oriented), so that they no longer

well on mathematical balance, but rather emphasize

the proportionality of rights and obligations among

the parties, regardless of the proportion of the final

results received by the parties (Ridwan Khairandy,

2013). Looking at it from a business law perspective,

the existence of a consumer contract is an exception

to business contracts in general, where in the

consumer contract; there is a validity of public law

and private law. The principle of freedom of contract

is very limited to consumer contracts because the

implementation of the contract is made by default

through a standard contract, so it requires the

application of public law in consumer contracts as a

form of legal protection from the state to consumers

who have a weaker position or bargaining position

when compared to the producer / business actor (Peter

Mahmud Marzuki, 2009).

Initially, legal protection for consumers can be

categorized in two forms, namely: 1) no conflict (pre-

purchase), ie if there is no conflict or no conflict, then

it can be done in two ways, namely legislation and

voluntary self-regulation. Legislation is carried out by

designing and stipulating various laws and

regulations, while voluntary self-regulation is carried

out through the design and establishment of

regulations by voluntary business actors; and 2)

conflict (post purchase), namely in the event of a

conflict or conflict between the consumer and

business actor, it can be resolved through the

settlement of consumer disputes, both litigation and

non-litigation, to resolve the conflict (Johanes

Gunawan, 2001). Settlement of consumer disputes is

regulated in Article 45 to Article 48 of Law No.

18/1999 which states that, consumer disputes can be

resolved through court or outside the court based on

the wishes of the parties. If the consumer and business

actor have chosen a particular dispute resolution

forum in the agreement made by both, both through

iN-LAC 2018 - International Law Conference 2018

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litigation and non-litigation, then the parties must

submit to the clause.

Adagium caveat emptor shifts to caveat venditor,

where previously consumers are required to be

cautious in using a product shifted into a demand for

producers to be careful and require factories to be

careful about their products so as not to cause harm to

consumers because consumers are entitled for non-

defective products. In the event that a consumer

obtains a defective product, the consumer has the

right to obtain compensation (Celina Tri, 2011). In

anticipating products or services that harm or harm

consumers, most countries participating in free trade

have adopted the doctrine of product liability in their

legal systems, such as Japan, the United States and

the European Economic Community and other

countries. Based on Black's Law Dictionary, product

liability is “A manufacturer’s or seller’s tort liability

for any damages or injuries suffered by a buyer, user,

or bystander as a result of a defective product;

Product liability can be based on a theory of

negligence, strict liability, or breach of warranty”

(Bryan A. Garner, 2004). Product liability is a legal

accountability mechanism of a person / body that

produces a product (producer, manufacturer), a

person / body that moves in a process to produce a

product (processor, assembler) or distribute (seller,

distributor) the product (Husni Syawali & Neni Sri,

2000). In another view, product liability is also

defined as the responsibility of the producers for the

products they have brought into circulation, which

causes losses due to defects inherent in the product

(Agnes M. Toar, 1988).

The European community, especially the

Netherlands, prescribes the criteria to postulate the

existence of product liability, that is, if they fulfill the

following conditions: 1) the existence of a producer,

which can be qualified as a producer, is the producer

of finished products, raw material producers, spare

parts makers, everyone who reveal himself as a

producer by stating his name or certain identification

that distinguishes the original product on a particular

product, the importer of a product with the intent to

sell, rent, lease or other forms of distribution in trade

transactions, and suppliers in terms of identity cannot

be found from producers or importers; 2) the

existence of consumers, where those who can qualify

as consumers are end consumers (end-consumer or

ultimate consumers); 3) the presence of a product,

which is a moving object, even if the moving object

has become a component that is attached to or

becomes part of other fixed objects, such as

electricity, with the exception of agricultural and

hunting products; 4) loss, namely loss to humans or

loss to property, other than the product concerned;

and 5) the defect in the product, where the product is

qualified to contain damage because it does not meet

security by considering the appearance of the product,

the intended use of the product and when the product

is placed on the market (Celina Tri, 2011).

4 ELABORATING THE

CONCEPT OF CONSUMER

AND THE PRINCIPLE OF

PRODUCT LIABILITY

PROVIDED IN INDONESIAN

REGULATION COMPARED TO

THE CONSUMER RIGHTS

DIRECTIVE 2011/83/EU ON

COSUMER PROTECTION

In relation to product defects, it can be found in three

classifications according to the production stages,

namely production damage, design damage and

inadequate information provision. The regulatory

objective regarding product liability is to reduce

accident rates due to defective products and provide

compensation for victims of defective products that

cannot be avoided (Az Nasution, 2000). In Indonesia,

before the enactment of Law No. 8/1999, in formal

juridical terms, the principle of product liability has

been regulated in the BW, including Articles 1322,

1473, 1474, 1491, and Articles 1504 to 1511 BW,

although the scope of the material is not as extensive

as the material in Law No. 8/1999. Bloembergen

provides that liability can be filed with 2 (two) basis,

namely accountability under agreement or liability

based on unlawful conduct. While accountability that

is based on unlawful acts refer to Article 1365 BW,

where consumers must be able to prove the existence

of production errors in their producers or

subordinates.

In its development, product accountability,

whether based on agreements or unlawful acts, is

deemed no longer in accordance with the needs of

legal protection for consumers. In international

practice, there is a known absolute accountability

doctrine (strict product liability). According to

Black’s Law Dictionary, strict products liability

adalah “product liability arising when the buyer

proves that the goods were unreasonable dangerous

and that (1) the seller was in the business of selling

goods, (2) the goods were defective when they were

in the seller’s hands, (3) the defect caused the

Rediﬁning the Principle of Consumer Contract to Maximize Consumer Protection: Elaboration on Product Liability Principle

407

plaintiff’s injury, and (4) the product was expected to

and did reach the consumer without substantial

change in condition” (Bryan A. Garner, 2004). The

principle of absolute product liability is a principle of

accountability that is not based on faults (negligence)

and contractual relationships (privity of contract)

between the producer and the consumer, but is based

on a defect in the product (objective liability) and risk

or losses suffered by consumers (risk based liability).

The producer as an entrepreneur / factory / seller is

accountable for the fault of his product, so that in

absolute accountability, the consumer does not need

to prove the production error of the producer or

subordinate, but the consumer only proves: 1) that the

product he bought is defective; 2) that the defect can

cause loss / accident; and 3) that the defect poses a

danger (Howel A. Rate, 2007).

Basically, most of the provisions in Directive

85/374 / EEC on Liability for Defective Products jo.

Directive 1999/34 / EC is identical to the provisions

in Law No. 8/1999, including: Article 3 Directive

85/374 / EEC on Liability for Defective Products jo.

Directive 1999/34 / EC which regulates producers,

namely goods makers; the maker of raw materials or

components of a product, someone who lists his name

as an item maker, importer (for sale, rent or leasing or

other forms of distribution), and supplier, if the maker

of the goods is not known, which is identical to the

definition of business actor as stipulated in Article 1

number 3 of Law No. 8/1999 along with an

explanation; Article 2 Directive 85/374 / EEC on

Liability for Defective Products jo. Directive 1999/34

/ EC which regulates the definition of products

covering all movable goods, except agricultural

products which after the amendment the provisions

change into all movable objects, even if put into other

moves or become immovable, including electricity,

primary agricultural products (products from land,

stock-farming and fisheries, including products that

have undergone initial processing) and games. These

provisions are identical to Article 1 number 4 and

number 5 Law No. 8/1999 which defines products are

all goods and / or services; and Article 9 Directive

85/374 / EEC on Liability for Defective Products jo.

Directive 1999/34 / EC which stipulates that losses

that can be held liable are losses that cause death or

accident of a person and / or damage to all or part of

property. This is identical to the provisions of Article

19 of Law No. 8/1999.

In relation to product liability, the principle of

product liability adopted in Directive 85/374 / EEC

on Liability for Defective Products jo. Directive

1999/34 / EC is liability without error (strict liability;

liability without fault; principle of objective liability;

risk based liability). The principle is then applied to

all member countries, by elaborating in the national

law of each member country, such as the United

Kingdom which applies strict liability in the

Consumer Protection Act 1987 (Inosentius, 2004).

This appears in the opening of the second paragraph

of Directive 85/374 / EEC on Liability for Defective

Products jo. Directive 1999/34 / EC which states that

“Whereas liability without fault on the part of the

producer is the sole means of adequately solving the

problem, peculiar to our age of increasing

technicality, of a fair apportionment of the risks

inherent in modern technological production”.

Furthermore, it is confirmed in Article 4 of Directive

85/374 / EEC on Liability for Defective Products jo.

Directive 1999/34 / EC, that the verification system

adopted by Directive 85/374 / EEC on Liability for

Defective Products jo. Directive 1999/34 / EC is an

inverse proof system, in which the consumer is

obliged to prove: 1) loss; 2) damage to goods; and 3)

the relationship between property damage and loss. In

addition, in Article 7 Directive 85/374 / EEC on

Liability for Defective Products jo. Directive 1999/34

/ EC, states that producers can free themselves from

their responsibilities if they can prove: 1) do not

intend to sell their goods on the market; 2) a defect

arises after the goods are on the market; 3) the product

has changed shape; 4) defects arise as a result of

meeting government regulations or regulations; 5)

defect technology cannot be detected when the goods

are distributed; or 6) for component makers, the

instructions for the use of the goods are made by the

makers of finished goods. Both of these provisions

indicate that the product liability principle is adopted

in Directive 85/374 / EEC on Liability for Defective

Products jo. Directive 1999/34 / EC is a strict liability

because the liability is not based on the presence or

absence of errors but whether there is a defective

product.

In Indonesia, accountability based on agreements

or unlawful acts was also followed before the Law

No. 8/1999. With the promulgation of Law No.

8/1999, the accountability of business actors for

consumer losses is specifically regulated in Chapter

VI, Article 19 to Article 28 of Law No. 8/1999. In

Law No. 8/1999 there is provisions concerning

defective products, but Article 11 letter b of Law No.

8/1999 uses the term hidden disability and Article 8

paragraph (2) and (3) Law No. 8/1999 uses the term

handicapped or used. However, in the event that

consumers suffer losses due to defective products,

Law No. 8/1999 does not adhere to the strict liability

principle consistently, but adheres to the semi strict

liability principle. This can be observed in Article 19

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of Law No. 8/1999 which states that business actors

are responsible for providing compensation for

damage or loss to consumers, while in Article 28 of

Law No. 8/1999 emphasized that proof of the

existence of an element of error is the burden of the

business actor. Furthermore, in Article 27 of Law No.

8/1999 states that there is a limitation of

responsibility, whereby business actors can be

released from part or all of the responsibility for

losses suffered by consumers if the item is not

circulated, defects arise later and are caused by the

negligence of the consumers themselves.

The three provisions of article No. Law 8/1999

shows that Law No. 8/1999 adheres to product

liability with semi strict liability because to be able to

account for a business actor must still be proven an

element of error which is the basis of the existence of

such accountability even though the proof is the

burden of the business actor himself. Whereas in strict

liability, business actors are absolutely accountable

without the need for proof of error, because the point

of strict strict liability is found in the defective

product itself. Thus, basically the concept of product

accountability carried out in Law No. 8/1999 remains

guided by the legal construction of risk liability in

violating the law as regulated in Article 1367 BW. In

connection with the adoption of the principle of semi

strict liability in Indonesia, in the case of the trainer's

liability as a fitness service provider, the trainer as a

fitness service provider himself must prove that he is

not guilty of the loss of his consumers because he

meets the requirements Operational standards that

have been set in accordance with the ability and

endurance of consumers.

5 CONCLUSION

Consumer contracts are a form of business contract in

which not only private law, but public law in the

context of state intervention to balance the position of

the parties in the contract. It includes within consumer

contract category and protected by Law No. 8/1999 if

one party is the final consumer, the existence of a

business actor, and the existence of objects in the

form of goods and / or services. If these elements are

fulfilled, the dispute arising from the consumer

contract concerned can be submitted in the settlement

of consumer disputes through litigation in the court

and non-litigation through BPSK or settlement

between the parties. Thus, not every business contract

in the banking sector is a consumer contract whose

law enforcement can be carried out based on Law No.

8/1999, because not every bank customer is within the

last chain of consumer. Indonesian legislation

governing consumer protection, especially Law No.

8/1999, does not adhere to the strict liability principle

in product liability. This is different from

international practices, one of which is as stipulated

in Directive 85/374 / EEC on Liability for Defective

Products jo. Directive 1999/34 / EC which has

applied the strict liability principle in product

liability. There needs to be an explicit classification

of bank customers belonging to the category of end

consumers protected by Law No. 8/1999 and

customers as consumers between those not protected

by Law No. 8/1999, as well as consumers in other

fields. It is also necessary to have legal certainty in

consumer protection law enforcement by BPSK with

reference to Law No. 8/1999, so that disputes that are

not within BPSK competencies must be declared

rejected by BPSK. It is necessary to accommodate the

strict liability principle in product liability in

Indonesia by way of regulation in Law No. 8/1999, so

businesses can be more careful in circulating their

products to the free market.

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