Performance Guarantee Agreements are essential financial security instruments in Indonesian business transactions, particularly in construction, infrastructure, and large-scale commercial projects. These agreements are commonly required when one party needs assurance that another party will fulfill its contractual obligations, with a financial institution providing this assurance through a guarantee. The document must comply with Indonesian Civil Code (KUHPerdata) requirements, banking regulations, and Financial Services Authority (OJK) directives. It typically includes detailed provisions on the guarantee amount, validity period, claim procedures, and enforcement mechanisms. Performance Guarantee Agreements are particularly crucial in government contracts, where they're often mandatory under procurement regulations, and in private sector projects where significant financial exposures need to be managed.
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1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Principal (party whose performance is being guaranteed), and the Beneficiary
2. Background: Context of the underlying obligation and purpose of the guarantee, including reference to the main contract being guaranteed
3. Definitions: Definitions of key terms used throughout the agreement, including 'Guaranteed Obligations', 'Guarantee Amount', and 'Claim Notice'
4. Guarantee: Core section detailing the guarantee commitment, amount, and scope of the guaranteed obligations
5. Duration and Validity: Term of the guarantee, including effective date, expiry date, and any extension provisions
6. Demand and Payment: Procedures for making a claim under the guarantee, including notice requirements and payment timeframes
7. Guarantor's Rights and Obligations: Detailed obligations of the Guarantor and conditions under which the guarantee can be enforced
8. Principal's Covenants: Obligations of the Principal, including indemnification of the Guarantor and maintenance of the underlying contract
9. Representations and Warranties: Standard representations and warranties from all parties
10. Events of Default: Circumstances constituting default and consequences thereof
11. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for disputes
12. Notices: Communication procedures and contact details for all parties
13. Execution: Signature blocks and execution formalities
1. Counter-Indemnity: Optional section when the Principal provides specific indemnity to the Guarantor, commonly used in bank guarantees
2. Step-In Rights: Optional provisions allowing the Guarantor to take over the Principal's obligations in certain circumstances
3. Multiple Guarantors: Required when there is more than one Guarantor, defining joint and several liability
4. Assignment and Transfer: Optional provisions regarding the ability to transfer or assign rights under the guarantee
5. Language: Required for dual-language agreements, specifying the prevailing language version
6. Bank-Specific Requirements: Additional provisions required by specific banking institutions
7. Anti-Money Laundering Compliance: Optional section for enhanced compliance requirements in certain financial institutions
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract: Copy or key terms of the contract being guaranteed
3. Guarantee Amount Calculation: Details of how the guarantee amount is calculated or adjusted
4. Required Documents: List of documents required for making a valid claim
5. Authorized Signatories: List of persons authorized to make demands under the guarantee
6. Bank Details: Payment instructions and bank account details for claim payments
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