New Construction Agreement Template for Indonesia

When embarking on a construction project in Indonesia, you need a comprehensive New Construction Agreement to establish clear legal obligations between all parties involved. This contract serves as your primary protection mechanism, ensuring compliance with Indonesian construction laws while defining project scope, payment terms, and quality standards.

When do you need this document?

You require a New Construction Agreement whenever you're undertaking new building construction, infrastructure development, or major renovation projects in Indonesia. This includes residential developments, commercial buildings, industrial facilities, and public infrastructure projects. The agreement becomes essential when engaging main contractors, subcontractors, architects, or engineering consultants for projects requiring building permits (IMB) under Indonesian law. You'll also need this document when securing financing from banks or when government authorities require formal construction contracts for permit approval.

Key legal considerations

Your construction agreement must address several critical legal elements to ensure enforceability and protection. Payment terms should specify milestone payments, retention amounts, and variation procedures in accordance with Indonesian Civil Code provisions. Quality standards must reference Indonesian National Standards (SNI) and building codes, with clear acceptance criteria and defect liability periods. Risk allocation clauses should cover force majeure events, including natural disasters common in Indonesia, and specify insurance requirements for both parties. Dispute resolution mechanisms should incorporate Indonesian arbitration laws or specify competent court jurisdiction. The agreement must also address contractor licensing requirements, worker safety obligations under Law No. 13 of 2003 on Manpower, and environmental compliance where applicable.

Legal requirements in Indonesia

Indonesian construction contracts must comply with Law No. 2 of 2017 on Construction Services, which mandates specific contractor qualifications and licensing requirements. Your agreement must verify that contractors hold valid Construction Business Licenses (SIUJK) and appropriate classification certificates for the project scope. Under Law No. 28 of 2002 on Buildings, the contract must ensure building permit (IMB) compliance and adherence to technical building standards. Government Regulation No. 29 of 2000 requires specific provisions regarding construction implementation standards and contractor obligations. The agreement must incorporate Indonesian language provisions for certain clauses and specify dispute resolution within Indonesian jurisdiction. Additionally, contracts involving foreign parties may require approval from the Investment Coordinating Board (BKPM) and must comply with foreign investment regulations in the construction sector.