The Bank Guarantee Performance Bond is a crucial financial instrument in Indonesian business transactions, particularly in construction, infrastructure, and major procurement projects. This document is required when a project owner needs security for a contractor's performance obligations, typically representing 5-10% of the contract value. The bond, issued by an Indonesian bank or a foreign bank's Indonesian branch, must comply with OJK regulations and the Indonesian Civil Code. It contains specific provisions about the guaranteed amount, validity period, demand mechanisms, and payment terms. The document becomes especially important in government tenders and large-scale private projects where performance security is mandatory. Banks typically issue these guarantees based on their assessment of the Principal's creditworthiness and often require counter-security or collateral.
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1. Parties: Identifies the Bank (Guarantor), the Principal (Contractor/Service Provider), and the Beneficiary (Project Owner)
2. Background: Brief description of the underlying contract/project and the requirement for the performance bond
3. Definitions: Defines key terms used in the performance bond including 'Guaranteed Sum', 'Expiry Date', and 'Demand'
4. Bank's Guarantee: Core section detailing the bank's unconditional obligation to pay the guaranteed sum upon valid demand
5. Amount of Guarantee: Specifies the maximum guaranteed amount and currency
6. Validity Period: States the effective date and expiry date of the guarantee
7. Demand Requirements: Specifies the formal requirements for making a valid demand under the guarantee
8. Payment Terms: Details the timing and method of payment upon receipt of a valid demand
9. Reduction and Release: Conditions under which the guaranteed amount may be reduced and when the guarantee will be released
10. Governing Law and Jurisdiction: Specifies Indonesian law as governing law and determines jurisdiction for disputes
1. Language Requirements: Required for dual-language bonds where one party is non-Indonesian, specifying which language prevails
2. Foreign Exchange Provisions: Required when the guarantee involves foreign currency, addressing exchange rate mechanisms
3. Transfer and Assignment: Include when transfer/assignment of rights under the guarantee needs to be specifically addressed
4. Counter-Indemnity: Optional section detailing the principal's obligation to indemnify the bank
5. Electronic Presentation: Include when electronic submission of demands is permitted
6. Force Majeure: May be included to address extraordinary circumstances affecting the guarantee
7. Anti-Money Laundering Compliance: Required for international transactions or when dealing with specific regulatory requirements
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Details: Summary or extract of the main contract/project details relevant to the guarantee
3. Specimen Signatures: Authorized signatures for making and accepting demands
4. Bank's Standard Terms and Conditions: Standard terms applicable to all bank guarantees issued by the bank
5. Required Supporting Documents: List of documents required to be submitted with any demand
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction
Infrastructure
Energy
Mining
Manufacturing
Government and Public Sector
Real Estate Development
Telecommunications
Oil and Gas
Transportation
Utilities
Relevant Teams
Legal
Finance
Treasury
Procurement
Project Management
Risk Management
Compliance
Commercial Operations
Business Development
Construction Management
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Contract Manager
Project Manager
Legal Counsel
Procurement Manager
Risk Manager
Commercial Director
Banking Relationship Manager
Compliance Officer
Corporate Secretary
Business Development Manager
Construction Manager
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