Production Services Agreement Template for Indonesia

A Production Services Agreement is a legally binding contract that establishes the terms and conditions for manufacturing or production services between a client company and a service provider in Indonesia. This document serves as the foundation for outsourced manufacturing relationships, ensuring clear expectations, quality standards, and regulatory compliance throughout the production process.

When do you need this document?

You need a Production Services Agreement when outsourcing manufacturing operations to Indonesian facilities, engaging contract manufacturers for product assembly, or establishing long-term production partnerships. This agreement is essential when working with Original Equipment Manufacturers (OEMs), hiring specialized industrial services companies, or setting up manufacturing arrangements with factory owners. It's particularly important for businesses expanding into Indonesia's manufacturing sector, companies requiring specialized production capabilities they don't possess in-house, or organizations seeking to reduce operational costs through strategic outsourcing partnerships.

Key legal considerations

Critical clauses include detailed scope of services, quality control standards, intellectual property protection, and liability allocation. You must address production timelines, delivery schedules, and performance metrics to ensure accountability. Payment terms, including milestone payments and penalties for delays, require careful structuring. Confidentiality provisions are crucial when sharing proprietary information or trade secrets. Force majeure clauses protect against unforeseen circumstances, while termination provisions outline exit strategies. Insurance requirements and indemnification clauses help manage operational risks inherent in manufacturing processes.

Legal requirements in Indonesia

Indonesian law requires compliance with the Indonesian Civil Code (KUHPerdata) for contract validity and enforcement. Law No. 3 of 2014 on Industrial Affairs governs production activities and facility standards that must be incorporated into your agreement. Law No. 13 of 2003 on Manpower applies when the service provider employs workers for your production needs, requiring adherence to local labor standards and working conditions. Copyright protections under Law No. 28 of 2014 must be addressed for any creative works or designs involved in production. Government Regulation No. 50 of 2012 mandates occupational safety and health management systems compliance. Additionally, if either party is a limited liability company, Law No. 40 of 2007 governs corporate authority and signing requirements for contract execution.