Limits of Criminal and Civil Liability in Default Disputes Containing Elements of Fraud

Abstract

This study analyzes the boundary between civil and criminal liability in contractual disputes where a breach of contract is alleged to contain elements of fraud. The problem arises because non-performance of an agreement does not automatically constitute a criminal offense, yet the existence of a contract cannot be used as immunity when the agreement was formed through deception. This normative legal research employs statutory, conceptual, and case approaches by examining the Indonesian Civil Code, Law Number 1 of 2023 on the Criminal Code, Supreme Court Jurisprudence Number 4/Yur/Pid/2018, and relevant judicial decisions and legal scholarship. The study finds that breach of contract remains within civil law when a valid agreement was made in good faith and the failure to perform occurred afterwards because of negligence, inability, or a contractual risk. Criminal fraud exists when, before or at the formation of the agreement, the perpetrator intended to obtain an unlawful benefit and used a false name or capacity, deceit, or a series of lies that causally induced the victim to deliver property, provide credit, acknowledge debt, or discharge a claim. This study proposes a five-stage assessment consisting of contract validity, reconstruction of pre-contractual representations, determination of the timing of intent, examination of the causal transfer of assets, and evaluation of post-contract conduct and evidence. The proposed framework prevents the criminal process from becoming a debt-collection instrument while preserving criminal accountability for contracts used as a vehicle of deception.