Legal Literacy - In the business and legal world, we often hear the terms Memorandum of Understanding (MoU), Letter of Intent (LoI), and Memorandum of Agreement (MoA). Although often considered the same, the three have different functions and legal strengths. Understanding the differences is very important so as not to take the wrong step when starting a collaboration.

1. Memorandum of Understanding (MoU) or Memorandum of Understanding

Literally, Memorandum of Understanding(MoU) can be interpreted as a memorandum of understanding. According to Black's Law Dictionary, "Memorandum" is the basis for drawing up a formal contract in the future, while "Understanding" is a statement of indirect agreement.Simply put, an MoU is an initial document that forms the basis for drafting a contract in the future. This document is created based on the results of an agreement between the parties, both orally and in writing, which is stated in a draft.Although not explicitly regulated in the Civil Code (KUHPerdata), the MoU has become a custom that has grown and developed in contract law practice. It is optional, meaning it may or may not be made before the parties draw up the main contract.According to Munir Fuady, the characteristics of an MoU are as follows:
  • The content is concise, often only one page.
  • Only contains the main points.
  • It is preliminary and will be followed by a more detailed contract.
  • It has a limited period of validity.
  • It is usually made in the form of an agreement under the hand.
  • Generally, there is no obligation that compels the parties to make a more detailed contract after the MoU is signed.