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A Performance guarantee is a binding promise where one party (usually a bank) commits to compensate another if someone fails to fulfill their obligations. In Indonesia's construction and procurement sectors, these guarantees protect project owners when contractors don't complete work as agreed or miss performance targets.

Under Indonesian banking regulations, these guarantees must come from licensed financial institutions and typically cover 5-10% of the total contract value. They're especially important for government projects, where Law No. 2 of 2017 on Construction Services requires contractors to provide performance guarantees before starting major infrastructure work.

Performance guarantees become essential when entering large-scale contracts in Indonesia, especially for construction projects, government tenders, or major supply agreements. Banks typically require them before financing infrastructure developments, and government agencies mandate them for public works contracts exceeding Rp 100 million.

Use these guarantees when managing high-value contracts with new partners, or when local regulations demand additional security. They're particularly valuable for protecting investments in manufacturing facilities, real estate developments, and infrastructure projects where contractor performance directly impacts project success and financial outcomes.

• Performance Bond Agreement: Basic guarantee form commonly used in construction projects, issued by banks to secure contractor obligations
• Performance Guarantee Agreement: More detailed version with specific performance metrics and payment terms, often used in commercial contracts
• Performance Guarantee Bond: Unconditional guarantee typically required for government tenders and public infrastructure projects
• Contract Performance Guarantee: Comprehensive guarantee covering multiple contract aspects, popular in manufacturing and supply agreements

• Banks and Financial Institutions: Issue performance guarantees and verify the financial capacity of contractors or suppliers
• Project Owners: Require guarantees to protect their investments in construction, infrastructure, or large procurement contracts
• Contractors and Suppliers: Must obtain and maintain guarantees to secure major contracts, especially for government projects
• Government Agencies: Mandate performance guarantees for public tenders and infrastructure projects above certain thresholds
• Legal Counsel: Draft and review guarantee terms to ensure compliance with Indonesian banking and construction laws

• Contract Details: Gather the main contract value, scope of work, and performance milestones that need guaranteeing
• Party Information: Collect complete legal names, registration numbers, and authorized signatories of all involved parties
• Guarantee Amount: Calculate the required guarantee value (typically 5-10% of contract value in Indonesia)
• Timeline Details: Define the guarantee's effective date, duration, and any specific performance periods
• Bank Requirements: Prepare financial statements and collateral documentation your bank needs
• Legal Framework: Our platform helps ensure your guarantee meets Indonesian banking regulations and construction laws

• Identification Details: Full legal names and addresses of guarantor, beneficiary, and principal party
• Guarantee Amount: Specific sum in Indonesian Rupiah, written in both numbers and words
• Scope of Coverage: Clear description of guaranteed obligations and performance standards
• Validity Period: Explicit start and end dates of the guarantee's effectiveness
• Claim Procedures: Detailed process for making claims and required documentation
• Governing Law: Reference to Indonesian law and relevant banking regulations
• Enforcement Terms: Conditions for guarantee activation and payment mechanisms

A Performance guarantee is often confused with a Bank Guarantee, but they serve distinct purposes in Indonesian business transactions. While both provide financial security, their scope and application differ significantly.

• Purpose and Scope: Performance guarantees specifically cover the completion of contractual obligations and quality standards, while bank guarantees can cover various financial obligations including loans, advance payments, or bid securities
• Trigger Events: Performance guarantees activate when specific performance metrics aren't met, while bank guarantees typically trigger upon financial default or specific monetary conditions
• Duration: Performance guarantees usually last throughout the project period plus a warranty period, whereas bank guarantees often have shorter, fixed terms tied to specific financial obligations
• Risk Assessment: Banks evaluate technical capability and project feasibility for performance guarantees, but focus primarily on financial standing for standard bank guarantees