The Advance Payment Agreement Letter is a crucial document in Indonesian business transactions where one party needs to make an advance payment to another party before receiving goods or services. This document is particularly important in sectors requiring significant upfront costs, such as manufacturing, construction, or large-scale procurement. Under Indonesian law, particularly the Civil Code (KUHPerdata) and Bank Indonesia regulations, such agreements must clearly document the payment terms, security arrangements, and compliance with local currency requirements. The letter typically includes details about the advance payment amount, purpose, timeline, security measures (such as bank guarantees), and conditions for refund or adjustment. It's commonly used when establishing new business relationships, engaging in large transactions, or when significant upfront costs are involved in project execution.
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1. Letter Header: Company letterhead, date, reference number, and formal address to recipient
2. Subject Line: Clear indication that this is an Advance Payment Agreement Letter
3. Opening Salutation: Formal greeting to the recipient
4. Reference to Main Contract: Citation of the main contract or business relationship this advance payment relates to
5. Payment Details: Specific amount of advance payment, payment method, and currency
6. Purpose of Advance Payment: Clear statement of what the advance payment is for and how it will be applied
7. Timeline: Schedule of when the advance payment is to be made and when the related goods/services will be delivered
8. Bank Account Details: Complete banking information for the transfer of funds
9. Acknowledgment: Statement of agreement to terms by both parties
10. Closing: Formal closing, signature blocks for both parties
1. Security Provisions: Details of any bank guarantees or other security measures for the advance payment - include when the advance payment is substantial
2. Refund Mechanism: Terms for refund of advance payment in case of non-performance - include when dealing with new business relationships
3. Tax Implications: Statement about tax treatment of the advance payment - include when tax implications need to be explicitly stated
4. Force Majeure: Provisions for unforeseen circumstances - include for high-value transactions or long delivery periods
5. Dispute Resolution: Specific procedure for handling disputes - include when dealing with international parties or high-value transactions
1. Payment Schedule: Detailed breakdown of payment installments if the advance payment is to be made in multiple tranches
2. Bank Guarantee Format: Template of bank guarantee if required as security for the advance payment
3. Delivery Schedule: Timeline of deliverables against which the advance payment is being made
4. Authorization Letter: Corporate authorization for signatories, if required
Relevant legal definitions
Clauses
Relevant Industries
Manufacturing
Construction
International Trade
Engineering
Technology Services
Real Estate Development
Industrial Equipment
Infrastructure
Energy
Telecommunications
Professional Services
Retail
Relevant Teams
Legal
Finance
Procurement
Treasury
Commercial
Operations
Risk Management
Contract Administration
Project Management
Supply Chain
Relevant Roles
Chief Financial Officer
Finance Manager
Procurement Manager
Contract Administrator
Legal Counsel
Treasury Manager
Project Manager
Commercial Director
Supply Chain Manager
Account Manager
Business Development Manager
Risk Manager
Financial Controller
Operations Director
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