Performance Bond Agreement Template for Indonesia

A Performance Bond Agreement is a critical security instrument commonly used in Indonesian business transactions, particularly in construction, infrastructure, and large-scale development projects. It provides financial protection to project owners (beneficiaries) against potential defaults or non-performance by contractors or service providers (principals). The document is structured in accordance with Indonesian civil law, banking regulations, and financial services authority (OJK) requirements. It details the guaranteed amount, validity period, claim conditions, and payment procedures. This type of agreement is especially important in government procurement projects where it's often a mandatory requirement. The Performance Bond Agreement typically represents a percentage (usually 5-20%) of the underlying contract value and remains valid throughout the contract period plus a warranty period.

1. Parties: Identification of Principal (the party whose performance is guaranteed), Surety (typically a bank or insurance company), and Beneficiary (the party in whose favor the bond is issued)

2. Background: Context of the underlying contract or obligation and the requirement for the performance bond

3. Definitions: Key terms used in the agreement including 'Bond Amount', 'Underlying Contract', 'Claim Period', and other relevant terms

4. Bond Amount and Scope: Specification of the guaranteed amount and the precise scope of the performance guarantee

5. Term and Validity Period: Duration of the bond, including start date, expiry date, and any extension provisions

6. Conditions for Claims: Specific circumstances under which the beneficiary can make a claim under the bond

7. Claim Procedure: Detailed process for making claims, including notice requirements and documentation

8. Payment Terms: Timing and method of payment upon valid claims

9. Surety's Rights and Obligations: The extent and limitations of the surety's obligations and their rights of recourse

10. Principal's Covenants: Obligations of the principal, including indemnification of the surety

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

12. Notices: Process and requirements for serving notices under the agreement

13. Termination: Circumstances and process for termination of the bond