Pacta sunt servanda is Latin for "agreements must be kept". It expresses the principle that a contract lawfully entered into binds the parties who made it, and that each must perform its obligations in good faith.
Origins
The maxim developed in canon law and the natural law tradition, which treated promise-keeping as a moral and legal duty. It became a cornerstone of the civil law codifications of the nineteenth century and of public international law, where Article 26 of the Vienna Convention on the Law of Treaties provides that every treaty in force is binding upon the parties and must be performed by them in good faith.
In Indonesian Law
Article 1338(1) of the Indonesian Civil Code states that all agreements lawfully made apply as law to those who made them. The same article adds that agreements may be revoked only by mutual consent or on grounds the law recognises, and that they must be performed in good faith.
Limits
The principle is not absolute. A contract is binding only if it meets the conditions of validity, which in Indonesia are consent, capacity, a certain object and a lawful cause (Article 1320 of the Civil Code). Performance may also be excused by force majeure, and courts may intervene where enforcement would offend good faith, public order or mandatory law.
Why It Matters
Commerce depends on predictability. Without the assurance that promises will be enforced, parties could not plan, lend, invest or trade with confidence.