The Contract Performance Guarantee is a critical document in Indonesian business transactions, particularly in large-scale projects and government contracts. It serves as a financial security instrument where a guarantor (usually a bank) guarantees the performance obligations of a contractor or service provider. The document is essential when undertaking significant projects in Indonesia, especially in construction, infrastructure, or government contracts where performance security is mandatory. The guarantee must comply with Indonesian Civil Code (KUH Perdata) requirements, banking regulations, and specific sector requirements. It typically includes details of the guaranteed amount (usually 5-10% of the contract value), validity period, claim mechanisms, and release conditions. This document is particularly important in public procurement projects under Presidential Regulation No. 16 of 2018 and requires careful attention to both Indonesian and English language versions.
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1. Parties: Identification of the Guarantor (usually a bank), the Principal (contractor/service provider), and the Beneficiary (project owner/employer)
2. Background: References to the underlying contract being guaranteed, including contract number, date, and project description
3. Definitions: Key terms used in the guarantee including 'Guaranteed Sum', 'Expiry Date', 'Underlying Contract', and 'Event of Default'
4. Guarantee: Core guarantee provision specifying the maximum amount and the guarantor's unconditional obligation to pay
5. Term and Validity: Duration of the guarantee, including effective date, expiry date, and any extension conditions
6. Claim Procedure: Detailed process for making claims under the guarantee, including notice requirements and payment timeline
7. Reduction and Release: Conditions under which the guarantee amount may be reduced and when the guarantee will be released
8. Assignment: Provisions regarding whether and how the guarantee can be transferred or assigned
9. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for disputes
10. Language: Clause specifying that the document is in Indonesian and English, with Indonesian version prevailing
1. Counter-Indemnity: Required when the principal provides counter-indemnity to the guarantor, typically in bank-issued guarantees
2. Step-In Rights: Optional clause allowing the guarantor to step into the principal's position in the underlying contract
3. Multiple Beneficiaries: Required when the guarantee is issued in favor of multiple beneficiaries
4. Force Majeure: Optional clause defining force majeure events and their impact on the guarantee
5. Amendments to Underlying Contract: Required when the guarantee needs to address how changes to the underlying contract affect the guarantee
6. Currency Provisions: Required for guarantees involving foreign currency or cross-border payments
1. Form of Demand: Template for making a claim under the guarantee
2. Copy of Underlying Contract: Referenced contract being guaranteed (usually key pages only)
3. Payment Instructions: Banking details and procedures for claim payments
4. Authority Documents: Evidence of authority of signatories for all parties
5. Performance Standards: If applicable, specific performance criteria that trigger the guarantee
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