Warranty Bond is basically a type of construction bond (can also be in other fields but is limited) that provides maintenance of the project for a certain period of time (in the form of guarantee funds) after the project is completed.

So that the function of this obligation is to guarantee the quality of the work of the contractors who work on the project, and that they have carried out their work in accordance with the provisions of applicable laws and regulations, building code standards and construction standards applicable in the country. Thus a maintenance bond protects the recipient from defective or imperfect workmanship or materials, and is also referred to as a “maintenance bond”.

In general, the use of maintenance bonds is often used in public construction projects where the budget comes from the state budget. However, they are sometimes requested or required by private construction owners, as in the example below.

Consequently, if the contractor’s work on certain projects is unsatisfactory or not in accordance with the request, both in terms of workmanship or materials and so on, the oblige here can file a claim against the maintenance bond, during what is called the ‘maintenance period’. And if the claim can be proven, then the guarantor here has an obligation to provide financial compensation to the project owner for the damage and loss due to the problem.

The following is an example of a warranty bond that can be used as a reference.

Issuing Bank : __ Co., Ltd., a company duly established and existing under the laws of , having its address at _, Seoul, Korea

Beneficiary : , a limited liability company duly established and existing under the laws of the Republic of Indonesia, having its address at ___, Jakarta 12780, Indonesia

Applicant : Co., Ltd, a company duly established and existing under the laws of Korea, having its address at ____ Seoul, Korea.

Guaranteed Amount : USD 10,000,000

Issuance Date : _

Expiry Date : __

Warranty Guarantee No. :

1. We have been informed that the Applicant and the Beneficiary have entered into the Contract No.: dated for Supply of __ (hereinafter called as the “Contract”).
2. At the request of the Applicant, we, _ Bank as the Issuing Bank, issue a warranty bond (hereinafter called as the “Bond”) in favor of the Beneficiary, and hereby unconditionally and irrevocably undertake to pay to the account opened in the name of Beneficiary and/or designated by the Beneficiary, any sum or sums you may claim from time to time from us up to but not exceeding the total amount of USD (say: United States of America Dollars only) within _ (_) days upon our receipt of your first original complying written demand in the form annexed to this Bond (Form A), notifying us of any and/or all of the Applicant’s breach relating to warranty obligations under the Contract and your demand. Provided however, the demand for payment shall be received by us at the address indicated above on or before the Expiry Date.
3. The undertaking contained in this Bond shall constitute direct and fundamental obligation of ours and are unconditional and irrevocable. We also agree and undertake that no extension of time granted to the Applicant by the Beneficiary and/or any and/or all change(s) in terms and conditions of the Contract which may be agreed between the Beneficiary and the Applicant shall in any way release us from any and/or all of our liability under this Bond.
4. We shall not be obliged to verify any statement contained in any of the Beneficiary’s complying demand or other notices and/or documents which may be served on or presented by the Beneficiary in accordance with the terms of this Bond and we shall accept the Beneficiary’s statement therein as conclusive evidence of the facts stated.
5. This Bond shall become effective from the Issuance Date and shall be expire at our office indicated above on the Expiry Date. Upon its expiry, it shall be automatically null and void, whether it is returned to us or not.
6. All charges shall be borne and paid by the Applicant.
7. Notwithstanding any other provisions of this Bond and unless stipulated otherwise herein, this Bond is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 Revision, ICC Publication No. 758. Any disputes and/or other matters which may arise out of or in relation to this Bond shall be governed in all respects by the laws of and any disputes and/or other matters which may arise out or in relation to this Bond shall be finally submitted to Singapore International Arbitration Centre (hereinafter referred to as “SIAC”) and shall be held at in accordance with the rules of SIAC.

For and on behalf of the Issuing Bank,
_ BANK Co., Ltd.

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_ Co., Ltd.

Form A.

DEMAND FOR PAYMENT
To: Co., Ltd.
___________ Seoul, Korea
Republic of Korea

Re: Warranty Bond No. guarantee number

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Dear Sirs/Madams,

A Warranty Bond dated _ [No. guarantee number] has been issued by Co., Ltd., in favour of PT. _

We, PT. _____, having its registered office at _, Indonesia, certify that ____Co., Ltd, having its registered office _____________Korea, has materially breached the article(s) [numbers and titles of the breached articles] under the Contract ___ dated _ as follows:

Respects of Breaches:___________________________________________________

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Therefore, in accordance with the provisions of Warranty Bond, we make the demand for the payment in the amount of USD _____________under the Warranty Bond.
We agree as follows: (i) we will receive the demanded amount within thirty (30) days from your receipt of this demand for payment, (ii) we will notify in writing the invalidity of this guarantee to our bank and any party relevant to this guarantee immediately upon our receipt of the demanded amount, and (iii) we will receive the demanded amount through the account below.
Account Name:

Account No:

Bank:

Bank Code:

Swift Code:

Yours faithfully,

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[Name]
[Title]
For and on behalf of PT. _

Date:______

Subscribed and sworn to before this
_ day of , _.

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Notary Public
(Notary Stamp or Seal Must be Affixed)