Advance Payment Agreement Template for Indonesia

The Advance Payment Agreement is essential in Indonesian business transactions where upfront payments are required to initiate projects or secure services. This document is particularly crucial in sectors such as construction, manufacturing, and large-scale procurement, where significant initial capital is needed. The agreement must comply with Indonesian Civil Code (KUH Perdata) requirements and relevant Bank Indonesia regulations, especially regarding currency usage and payment terms. It typically includes comprehensive security arrangements such as bank guarantees or corporate guarantees to protect the advance payment. The document outlines specific conditions for disbursement, utilization, and recovery of the advance payment, while ensuring compliance with local legal requirements and business practices. This type of agreement is commonly used when substantial upfront costs are involved, or when establishing trust between parties in new business relationships.

1. Parties: Identification of the parties making and receiving the advance payment, including their legal details and authorized representatives

2. Background: Context of the agreement, including reference to the main contract or relationship for which the advance payment is being made

3. Definitions: Key terms used throughout the agreement, including 'Advance Payment', 'Security', 'Main Contract', etc.

4. Advance Payment Amount and Currency: Specific amount of the advance payment, currency, and any applicable exchange rate provisions

5. Payment Terms and Conditions: Timing, method, and conditions precedent for the advance payment

6. Purpose and Use of Advance Payment: Specified purposes for which the advance payment may be used and any restrictions

7. Security Arrangements: Details of any security provided for the advance payment (bonds, guarantees, etc.)

8. Repayment or Recovery: Terms for how the advance payment will be recovered or adjusted against future payments

9. Representations and Warranties: Standard representations by both parties regarding authority, capacity, and compliance

10. Events of Default: Circumstances constituting default and consequences

11. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for disputes

12. General Provisions: Standard boilerplate clauses including notices, amendments, and severability