Medan High Religious Court Decision No. 127 of 2015: Shari'a Economy Appeal Regarding Meaning of Force Majeure Upheld

The appellant sought to challenge the decision of the Medan Religious Court (lower court). The lower court had determined that the non-issuance of a building permit from the Medan Spatial and Building Service (Dinas Tata Ruang dan Tata Bangunan Kota Medan) constituted a force majeure. Accordingly, it found that:

  1. the respondent (then plaintiff) was released from any liability under the murabahah credit facility agreement it had entered into with the appellant (the defendant) on 10 September 2013; and
  2. that the appellant must return to the respondent two deeds of title to properties leveraged by the respondent in return for the murabahah credit facility.

The appellant challenged the decision of the lower court on the following grounds:

  1. that the decision was erroneous and not based in law, insofar as the object of the agreement was stated as being three units, whereas it was for the purchase of building construction materials;
  2. that the lower court had incorrectly labelled the credit facility an al-bai', per art 20(2) of the Compilation of Shari'a Economy Laws, rather than a murabahah credit facility, that is, a credit facility that benefits both parties, provided by a shahib al-mal (creditor), per art 20(6) of the Compilation of Shari'a Economy Laws;
  3. that the lower was incorrect in defining the non-issuance of a building permit as a force majeure for the purposes of arts 1244-1245 of the Indonesian Civil Code, and also incorrect in applying the law because a force majeure only results in the parties being released from demands for damages, costs and/or profits to the party experiencing the force majeure, which causes it to default; and
  4. that the force majeure submitted by the respondent had already passed because the notice of unsuccessful application for a building permit was dated 5 May 2014, while the appellant was only informed of the notice on 19 August 2014 (three months after the fact), which was contrary to the 14-day statute of limitations contained in art 17(3) of the murabahah credit facility.

The court acceded to the appeal, concurring with the appellant's submission that the respondent was required to inform the appellant of the issuance (or lack thereof) of any relevant building permit, pursuant to the terms of the agreement. Accordingly, the court overturned the decision of the lower court, and ordered the respondent to pay costs.

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