Performance Guarantee Bond Template for Indonesia

A Performance Guarantee Bond is a crucial security instrument in Indonesian business transactions, particularly in construction, infrastructure, and large-scale projects. It serves as a financial guarantee issued by a bank or financial institution to protect the interests of project owners or employers against potential non-performance or default by contractors or service providers. The document must comply with Indonesian banking regulations, including OJK requirements and the Indonesian Civil Code. Performance Guarantee Bonds typically specify the guaranteed amount (usually 5-10% of the contract value), validity period, claim procedures, and conditions for release. They are essential for risk mitigation in significant commercial contracts and are often required in both private and public sector projects in Indonesia.

1. Parties: Identifies the three key parties: (1) Guarantor (usually a bank), (2) Principal (the party whose performance is guaranteed), and (3) Beneficiary (the party in whose favor the guarantee is issued)

2. Background: References the underlying contract or agreement requiring the performance guarantee and explains the context of the guarantee

3. Definitions: Defines key terms used in the bond including 'Guaranteed Obligations', 'Guarantee Amount', 'Expiry Date', and other relevant terms

4. Guarantee: The core section detailing the guarantee commitment, maximum guarantee amount, and nature of the guarantee (unconditional, irrevocable, etc.)

5. Claim Procedure: Specifies the process and requirements for making a claim under the guarantee, including notice requirements and documentation

6. Payment Terms: Details the timing and method of payment upon valid claim, including currency and bank account requirements

7. Validity Period: Specifies the effective date and expiry date of the guarantee

8. Reduction and Release: Conditions under which the guarantee amount may be reduced and when the guarantee will be released

9. Governing Law and Jurisdiction: Specifies Indonesian law as governing law and defines jurisdiction for dispute resolution