Long Term Supplier Agreement Template for Indonesia
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What is a Long Term Supplier Agreement?
The Long Term Supplier Agreement is a crucial document for businesses establishing sustained supply relationships in Indonesia. It is particularly relevant when parties intend to create a stable, long-term business relationship with regular supply commitments. The agreement addresses key requirements under Indonesian law, including provisions of the Civil Code (KUHPerdata) and Trade Law No. 7 of 2014, while incorporating necessary elements for foreign investment compliance where applicable. This document type is essential for businesses seeking to establish reliable supply chains, secure consistent product or service delivery, and maintain quality standards over extended periods. It typically includes detailed provisions for pricing mechanisms, quality control, delivery terms, and risk allocation, while ensuring compliance with local regulatory requirements and business practices.
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About the Long Term Supplier Agreement
A Long Term Supplier Agreement is a comprehensive commercial contract that establishes ongoing supply relationships between businesses in Indonesia. This legal document creates binding commitments for both suppliers and buyers over extended periods, typically ranging from several years to decades, ensuring stable business operations and predictable supply chains under Indonesian commercial law.
When do you need this document?
You need a Long Term Supplier Agreement when establishing sustained commercial relationships that require consistent supply commitments. Manufacturing companies often use these agreements to secure raw materials or components from reliable suppliers over multiple years. Retail businesses require them when partnering with distributors for regular product deliveries across Indonesia's diverse market regions. Construction companies rely on these contracts to guarantee building materials supply for large-scale projects spanning several years. Technology companies use them to ensure consistent hardware or software licensing arrangements with international suppliers operating in Indonesia.
Key legal considerations
Your agreement must address several critical legal elements to ensure enforceability under Indonesian law. Supply obligations must specify exact quality standards, delivery schedules, and quantity commitments to avoid disputes during contract performance. Pricing mechanisms require careful structuring, including escalation clauses, currency provisions, and adjustment procedures that comply with Indonesian monetary regulations. Force majeure clauses must account for Indonesia-specific risks such as natural disasters, regulatory changes, and infrastructure challenges that commonly affect supply chains. Termination provisions should outline specific circumstances, notice periods, and consequences that align with Indonesian contract law principles. Quality control measures must establish inspection procedures, acceptance criteria, and remedial actions when products or services fail to meet agreed standards.
Legal requirements in Indonesia
Indonesian law imposes specific requirements on long-term supply agreements, particularly those involving foreign parties or cross-border transactions. Under the Civil Code (KUHPerdata), contracts must contain essential elements including clear identification of parties, specific obligations, and lawful consideration to ensure legal validity. Trade Law No. 7 of 2014 requires compliance with trading activity regulations, including proper business licensing and adherence to commercial standards. Foreign suppliers must comply with Investment Law No. 25 of 2007, which may require establishment of local Indonesian entities or partnerships for certain business activities. Competition Law No. 5 of 1999 prohibits anti-competitive clauses such as exclusive dealing arrangements that unreasonably restrict market access. Electronic transaction elements must comply with Government Regulation No. 80 of 2019 if the agreement involves digital commerce components. Additionally, agreements involving international suppliers may require foreign exchange compliance and must address currency conversion procedures according to Bank Indonesia regulations.
GOVERNING LAW
Applicable law
This Long Term Supplier Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 7 of 2014 on Trade: Governs trading activities in Indonesia, including domestic and international trade relationships and supply chain operations
Law No. 5 of 1999 on Prohibition of Monopolistic Practices and Unfair Business Competition: Ensures the agreement doesn't contain provisions that could be considered anti-competitive or create unfair business practices
Law No. 25 of 2007 on Investment: Relevant for long-term supply agreements involving foreign parties, governing foreign investment and business relationships
Government Regulation No. 80 of 2019: Regulates electronic commerce and digital transactions, important if the supply agreement involves electronic transactions or communications
Law No. 24 of 1999 on Foreign Exchange Flow: Governs foreign currency transactions and reporting requirements, relevant for international payment terms
Law No. 40 of 2007 on Limited Liability Companies: Provides legal framework for corporate entities and their ability to enter into long-term contractual relationships
Law No. 8 of 1999 on Consumer Protection: While primarily focused on consumer protection, certain principles may apply to B2B relationships, especially regarding product quality and safety
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