Document background
The Advance Payment Agreement Letter is a crucial document in Indonesian business transactions where one party needs to make an advance payment to another party before receiving goods or services. This document is particularly important in sectors requiring significant upfront costs, such as manufacturing, construction, or large-scale procurement. Under Indonesian law, particularly the Civil Code (KUHPerdata) and Bank Indonesia regulations, such agreements must clearly document the payment terms, security arrangements, and compliance with local currency requirements. The letter typically includes details about the advance payment amount, purpose, timeline, security measures (such as bank guarantees), and conditions for refund or adjustment. It's commonly used when establishing new business relationships, engaging in large transactions, or when significant upfront costs are involved in project execution.
