What a Force Majeure Clause in a Bali Lease Actually Covers: Volcanic Eruptions, Pandemics, and Other Triggers Foreign Owners Overlook

A force majeure clause definition, in the Indonesian context, is narrower than most foreign buyers assume. Under Articles 1244 and 1245 of the Indonesian Civil Code, force majeure covers unforeseen events beyond the parties' control, such as acts of God or accidents, that prevent performance of a contractual obligation. But Indonesia also recognizes freedom of contract, which means the actual scope of a force majeure clause in a Bali villa lease is whatever the two parties wrote down. There is no default list of covered triggers. If a volcanic eruption or a pandemic is not named in the clause, a landlord or tenant cannot assume it is covered just because it feels like an obvious disaster.

This distinction matters more in Bali than in most jurisdictions, because Bali's risk profile includes an active volcano, a tourism economy exposed to sudden demand shocks, and a regulatory environment that has already been tested by a real pandemic. Foreign lease holders and villa owners who treat force majeure as boilerplate are the ones who discover, mid-crisis, that their contract offers no real protection.

TL;DR

• Indonesian law defines force majeure broadly (Articles 1244/1245 of the Civil Code), but the specific triggers covered in a Bali lease depend entirely on the clause's drafted language, not a legal default.
• Mount Agung's 2017 eruption caused an estimated Rp 11 trillion in economic losses and sharp declines in tourist arrivals, a real precedent for why volcanic disruption belongs explicitly in the clause.
• COVID-19 exposed a structural weakness: generic force majeure clauses in Bali commercial leases historically did not automatically suspend rent, and courts required proof of good faith and direct causation before granting relief.
• Presidential Decree No. 12 of 2020 labeled COVID-19 a non-natural disaster, but court precedent (Decision No. 162/PDT/2021/PT DPS) treated it as relative force majeure, not automatic contract cancellation.
• A well-drafted clause should name specific triggers, define notice and proof requirements, and set out what happens to rent, not just whether the contract survives.

About the author: PARADYSE Homes structures leasehold and freehold acquisitions for foreign buyers across Bali's prime submarkets, working with licensed Indonesian notaries on every contract to make sure clauses like force majeure are drafted for Bali's actual risk profile, not copied from a generic template.

What is a force majeure clause, and why does Indonesian law treat it differently than buyers expect?

A force majeure clause is a contract provision that excuses one or both parties from performing their obligations when an extraordinary event outside their control makes performance impossible [venable.com]. In most common-law jurisdictions, courts have built up decades of precedent on what counts as force majeure. Indonesia works differently. The Civil Code gives a general definition, but the specific events, the notice period, and the consequences for rent are all left to the contract itself.

That is not a loophole. It is a design feature of Indonesian contract law's emphasis on freedom of contract, and it means the clause in a Bali lease is only as strong as the drafting behind it. A one-paragraph clause that says "acts of God, war, and government action" without further detail is legally valid but practically thin. It does not tell either party what happens next: whether rent is suspended, reduced, or simply deferred, and for how long.

What events actually trigger force majeure in a Bali property lease?

Common force majeure clause examples in commercial and residential leases include natural disasters, war, government-imposed restrictions, and other events genuinely outside either party's control [fynk.com][spellbook.com]. In Bali specifically, the two triggers foreign owners most often overlook, and most need to plan for, are volcanic activity and public health emergencies.

• Volcanic eruptions. Mount Agung's 2017 eruption triggered widespread evacuations and closed Bali's airport for days at a stretch, cutting off the tourist arrivals that short-term rental income depends on. The disruption is estimated to have cost the local economy roughly Rp 11 trillion, with a direct hit to rental income for villa owners reliant on tourism. A lease that only mentions "natural disasters" in passing, without naming volcanic activity or airport closure specifically, leaves both sides guessing about whether a three-week eruption-driven shutdown actually triggers relief.
• Pandemics and public health orders. COVID-19 showed that a health crisis and a natural disaster are treated differently under Indonesian law and need separate language.
• Government action. Regulatory shifts, sudden zoning changes, or land-use restrictions can also qualify as force majeure triggers depending on how the clause is written [fennemorelaw.com].
• War, civil unrest, and infrastructure failure. Standard in most force majeure clause examples, though rarely the binding concern for Bali leases compared to the two triggers above.

How did COVID-19 expose the weaknesses in standard Bali lease clauses?

Building on the eruption precedent above, the pandemic tested Bali's lease contracts on a much larger scale, and most of them failed the test quietly rather than dramatically. Standard force majeure clauses in Bali commercial leases typically list acts of God, natural disasters, and government actions, but generic templates often do not automatically suspend rental obligations during a crisis. Legal experts who reviewed the aftermath now advise tailoring clauses to explicitly address pandemics and regulatory shifts, because standard contracts historically offered little real protection when tenants and villa operators lost income overnight.

The regulatory response added a further layer of nuance. Presidential Decree No. 12 of 2020 declared COVID-19 a non-natural national disaster. That declaration did not mean every lease in Bali was automatically void or every tenant automatically excused from rent. Indonesian courts have been explicit on this point: in Decision Number 162/PDT/2021/PT DPS, the pandemic was treated as relative force majeure, meaning obligations could be temporarily suspended, but only if the party seeking relief could show good faith and a direct causal link between the pandemic and their inability to perform. A tenant could not simply cite "COVID" and stop paying; they had to demonstrate the specific mechanism by which the pandemic prevented performance.

This is the practical lesson for foreign owners today: force majeure relief in Indonesia is not self-executing. It requires proof, process, and usually a paper trail showing the disruption actually caused the failure to perform.

What should a well-drafted force majeure clause actually include?

A related but distinct question from what triggers force majeure is what the clause should do once triggered, and this is where most generic contracts fall short. A clause that lists events but says nothing about consequences is only half a clause. At minimum, foreign owners and tenants should look for the following components, drafted with a notary rather than lifted from a template:

• Named triggers specific to Bali, including volcanic eruption, airport closure, and declared public health emergencies, not just generic "natural disaster" language.
• Notice requirements specifying how quickly the affected party must notify the other side and what documentation is required.
• Rent treatment during the event, stating clearly whether rent is suspended, reduced proportionally, or deferred with repayment terms.
• A causation standard that mirrors what Indonesian courts already expect: proof that the event directly prevented performance, not just that it made things harder.
• A term limit, after which either party can terminate if the disruption continues beyond a defined period.

This is a drafting discipline PARADYSE applies across full ownership and co-ownership transactions alike. Every lease routed through PARADYSE's in-house legal structuring is reviewed by licensed Indonesian notaries with these Bali-specific risks in mind, rather than defaulting to boilerplate language that has never been tested against a real eruption or a real health order. For buyers weighing leasehold structures more broadly, see PARADYSE Homes' guide to Hak Sewa versus Hak Guna Bangunan explaining how the underlying title structure interacts with contract terms like force majeure.

Does force majeure work the same way for leasehold and full ownership structures?

Stepping back from clause language, a separate concern is how force majeure interacts with the ownership structure itself. Leasehold agreements (Hak Sewa) are contractual by nature, so force majeure provisions sit directly inside the lease and govern the relationship between landlord and tenant for the life of the term. Freehold-equivalent structures for foreigners, typically HGB held through a PT PMA, involve a different legal relationship, since the foreign party owns the building rights outright rather than renting them. Force majeure clauses still matter here, but they tend to appear in management agreements, construction contracts, or rental pooling arrangements rather than in a single lease document.

For co-ownership structures specifically, where multiple Class B shareholders hold equity in an SPV, force majeure provisions typically sit at the SPV and management-agreement level, since the SPV, not any individual owner, is the counterparty to guest bookings and third-party contracts. This is one reason PARADYSE's co-ownership model routes every SPV agreement through the same legal team that handles full ownership transactions, so the force majeure language is consistent regardless of which ownership path a buyer chooses.

Frequently Asked Questions

Does Indonesian law automatically cover pandemics under force majeure?
No. Presidential Decree No. 12 of 2020 declared COVID-19 a non-natural disaster, but courts still require proof of a direct causal link and good faith before granting relief, as shown in Decision Number 162/PDT/2021/PT DPS.

Are volcanic eruptions automatically covered in a Bali lease?
Only if the clause names them or uses language broad enough to include them. Mount Agung's 2017 eruption is the clearest real-world precedent for why volcanic disruption should be listed explicitly rather than assumed under generic "natural disaster" wording.

Can a tenant stop paying rent during a force majeure event?
Only if the lease's force majeure clause specifies that outcome. Indonesian courts have treated pandemic-era non-payment as requiring proof, not an automatic right [contract-dependent].

What is the difference between force majeure and a standard termination clause?
Force majeure excuses performance due to an external, unforeseeable event; termination clauses typically deal with breach, non-renewal, or mutual exit unrelated to disaster or crisis [venable.com].

Should a force majeure clause set a maximum duration?
Yes. Without a defined term limit, a force majeure event with no end date can leave both parties in limbo indefinitely, which is why well-drafted clauses include a point at which either party can terminate.

Do co-ownership shareholders need to worry about force majeure separately from full owners?
The trigger events are the same, but the contract layer differs. Co-owners are protected through SPV-level and management-level agreements, while full owners typically see force majeure inside the lease or construction contract directly.

Is a generic force majeure template enough for a Bali villa lease?
Generally not. Standard templates often fail to address rent suspension or Bali-specific triggers like volcanic activity, which is why legal experts recommend tailoring the clause after the lessons of COVID-19.

About PARADYSE

PARADYSE is the ownership partner for Bali residential property, serving buyers through Full Ownership and Co-Ownership as two equally weighted paths under one accountable team. Every transaction, whether a full villa purchase or a fractional share in an SPV, runs through the same in-house legal structuring with licensed Indonesian notaries drafting contract terms, including force majeure provisions, around Bali's actual risk profile rather than generic templates. Buyers get one team accountable for sourcing, legal diligence, contract execution, and ongoing management, structured to hold up under real conditions, not just on paper. For a closer look at how lease terms and title structures shape what happens when a Bali contract expires, see PARADYSE's guide on what happens when a Bali villa lease expires.

If you are evaluating a Bali property purchase and want the contract terms reviewed properly before you sign anything, get in touch with PARADYSE to start the conversation.