Hiring a contractor is often the most practical solution for completing construction, renovation, or property improvement projects. However, problems may arise when a contractor suddenly stops working, abandons the project, or fails to meet the agreed timeline. For property owners, this can result in unfinished work, financial losses, and uncertainty about the next legal steps.
Under Indonesian law, a contractor who fails to fulfill obligations under a construction agreement may be considered to have committed breach of contract (wanprestatie). Before terminating the agreement, appointing another contractor, or demanding compensation, the property owner should first establish the contractor’s breach and follow the appropriate contractual and legal procedures.
What Are Your Rights When a Contractor Stops Working?
A construction agreement creates legally binding obligations for both parties. Article 1338 of the Indonesian Civil Code (KUHPerdata) establishes the principle that a legally valid agreement binds the parties as law. This principle is commonly known as pacta sunt servanda.
Therefore, a contractor generally cannot simply abandon the project without consequences when the contract requires the contractor to complete specific work within an agreed period.
A construction contract typically regulates:
- scope of work;
- project specifications;
- completion deadlines;
- payment stages;
- responsibilities of the parties;
- conditions for termination;
- force majeure; and
- dispute resolution.
Construction agreements must also be considered within the framework of Law No. 2 of 2017 concerning Construction Services and its implementing regulations.
What Should You Do When a Contractor Stops Working?
1. Review the Construction Agreement
The first step is to examine the construction contract carefully.
Determine whether the contractor has failed to perform specific contractual obligations, such as:
- missing an agreed deadline;
- abandoning the construction site;
- failing to provide agreed materials;
- failing to meet technical specifications; or
- refusing to continue the agreed work.
The contract should be the starting point for determining whether the contractor’s conduct constitutes wanprestatie and what remedies are available to the property owner.
2. Collect Evidence of the Contractor’s Breach
Before sending a legal notice or pursuing a claim, document the contractor’s failure to perform.
Important evidence may include:
- construction agreements or work orders;
- payment receipts and invoices;
- project schedules;
- photographs or videos of unfinished work;
- correspondence and chat records;
- records of requests to continue the work;
- evidence of project delays; and
- evidence of financial losses.
This documentation is important because the property owner generally needs to establish the contractual obligation, the contractor’s failure to perform, and the resulting loss when pursuing a claim for damages.
3. Send a Formal Notice or Somasi
If the contractor has failed to fulfill the agreement, the property owner may send a somasi, or formal legal notice, demanding that the contractor perform their obligations.
Article 1238 KUHPerdata regulates when a debtor may be considered in default (lalai), including after being declared negligent through a notice or when the agreement itself provides that the debtor is automatically in default upon the expiration of the agreed deadline.
A somasi can therefore serve an important legal function: it formally communicates the breach and provides an opportunity for the contractor to fulfill the outstanding obligation before further legal action is taken.
However, whether a somasi is required must be assessed based on the contract and the circumstances of the breach.
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Can You Terminate the Contractor’s Contract?
A property owner may have grounds to terminate a construction contract when the contractor commits a material breach, but termination should not be carried out arbitrarily.
Article 1267 KUHPerdata provides remedies for a party affected by non-performance of a reciprocal agreement, including seeking fulfillment of the agreement or its cancellation, together with compensation where the legal requirements are satisfied.
The contract should therefore be reviewed first to determine:
- whether termination is permitted;
- what constitutes a material breach;
- whether a notice period applies;
- whether the contractor must first be given an opportunity to remedy the breach; and
- how termination must be formally communicated.
Unilateral termination that does not comply with the contract or applicable law can create a new dispute between the property owner and contractor.
Can You Claim Compensation From a Contractor?
Yes, a property owner may seek compensation when the contractor’s breach causes legally recoverable losses.
Article 1243 KUHPerdata regulates compensation resulting from failure to fulfill an obligation after the debtor has been declared in default, subject to the applicable requirements.
Depending on the circumstances and evidence, the claim may relate to losses arising from:
- unfinished construction;
- payments for work that was not performed;
- additional costs required to complete the project; or
- other losses that can be legally established.
The amount of compensation cannot simply be assumed. The property owner should be able to demonstrate the causal relationship between the contractor’s breach and the claimed loss.
Can a Contractor Avoid Liability Because of Force Majeure?
A contractor may not necessarily be liable if their failure to perform was caused by a force majeure (keadaan memaksa) that legally excuses performance.
Whether force majeure applies depends on the circumstances, the contractual clause, and the applicable legal requirements.
For example, a contractor cannot automatically avoid liability merely by claiming that the project became difficult or more expensive. The relevant question is whether the event actually prevented performance and satisfies the requirements for force majeure under the contract and applicable law.
Should You Negotiate Before Filing a Lawsuit?
Not every construction dispute needs to immediately proceed to court.
The parties may first consider:
- negotiation;
- mediation;
- conciliation; or
- arbitration, if agreed in the contract.
Construction disputes often involve technical issues concerning specifications, project progress, payment, materials, and delays. Alternative dispute resolution can therefore provide a more practical mechanism for reaching a solution.
The applicable dispute resolution mechanism should be checked against the construction agreement and the requirements under the Construction Services Law.
What Happens If a Contractor Abandons the Project?
If the contractor is legally established to have breached the agreement, potential consequences may include an obligation to:
- complete the outstanding work;
- compensate the property owner for legally recoverable losses;
- return certain payments, depending on the contractual arrangement and circumstances; or
- bear additional costs arising from the breach where legally recoverable.
However, the contractor’s liability should be assessed based on the contract, evidence, the nature of the breach, applicable law, and any force majeure defense.
Supreme Court Decision No. 600 K/Pdt/2018
Supreme Court Decision No. 600 K/Pdt/2018 can provide context regarding contractual termination and the importance of contractual balance.
The case illustrates that contractual termination should not be treated as an arbitrary act. The rights of each party, the agreed contractual mechanism, and the circumstances surrounding the termination must be considered.
For a property owner dealing with an abandoned construction project, the practical lesson is important: do not immediately terminate the contractor and appoint a replacement without first documenting the breach and reviewing the termination mechanism in the contract.
What Should You Do Before Hiring Another Contractor?
If the original contractor has abandoned the project, appointing a replacement contractor may appear to be the quickest solution. However, the property owner should first document the project’s condition.
At minimum:
- Document the current construction condition.
- Record unfinished and defective work.
- Calculate payments already made.
- Obtain an assessment of the remaining work and estimated completion costs.
- Review the original contract’s termination provisions.
- Send the appropriate legal notice.
- Preserve evidence before removing or modifying the original contractor’s work.
This documentation can become important if the property owner later seeks compensation for additional costs incurred to complete the project.
How Can Construction Disputes Be Prevented?
Property owners can reduce the risk of contractor disputes by preparing a detailed construction agreement from the beginning.
The agreement should clearly regulate:
- scope and specifications of work;
- project milestones;
- completion deadlines;
- payment based on progress;
- retention or other payment safeguards where appropriate;
- responsibilities for materials;
- delay and penalty provisions;
- force majeure;
- termination rights;
- handover procedures; and
- dispute resolution.
Property owners should also conduct basic due diligence on the contractor’s experience, legal status, previous projects, financial capacity, and references before signing the agreement.
Conclusion
When a contractor stops working, the property owner should not immediately terminate the contract or appoint a replacement contractor. The safer approach is to review the agreement, document the contractor’s breach, determine whether the contractor is legally in default, issue a somasi where appropriate, and then consider negotiation, termination, or a compensation claim based on the contract and applicable law.
The key issue is not simply that the contractor has stopped working, but whether the contractor has breached a contractual obligation and what legal remedies are available to the property owner as a result.
Contractor stopped working, abandoned your project, or failed to meet the agreed deadline? Before terminating the agreement or appointing a replacement contractor, have your contract and evidence reviewed to avoid creating a new legal dispute.
Consult Hukumku’s legal team to assess your construction contract, establish the contractor’s breach, and determine the appropriate legal steps for termination or compensation.
