Sometimes, people in Indonesia cannot distinguish the difference between the function of MoU and Agreement, so that’s why there are some people who misuse both of the paper. Some of them think that MoU (stands for Memorandum of Understanding) can be used for a long term contract and has a strength legal binding. Some of the people think that MoU and agreement has no different. But the real is, there’s a huge different between MoU and agreement. The people in Indonesia especially a law student must to understand about this, so there will be no mistake when they have to take care about it.
So I’d like to explain a little bit about what is MoU itself and also agreement…
Memorandum of Understanding is a pre-contract agreement, basically the paper isn’t known in conventional law in Indonesia. But practically, MoU always used by the people especially in commercial areas. MoU by its definition is a legal acts from one of party or legal subject to declare the point to the other party that related to it about offering something that one of the party has or owned. In other word, MoU basically is a preliminary agreement which arranges and gives a chance to every party to has some feasibility studies first before making a detail and has strength legal bind agreement.
Based on its definition, it can be concluded that MoU is a legal paper of preliminary engagement or foundation of certainty. The content of MoU is only some of the principle things, not too detail. MoU has expire time, in other word it’s only temporary kind of agreement. Usually, MoU made informally, so there’s no force responsibility to make it into a contract or detail agreement, because there’s still a hesitation from one of the party to the other party so MoU was made to prevent the difficulties of cancellation.
As legally binding, the definition of agreement is an agreement reached between the parties who give the legal binding consequences to each other and in order to implement the points of agreement. If one of the party denies the agreement or do the default, so the party who did the default has to indemnify to the party who has been aggrieved such as written in the agreement. So agreement has strong legal impact than MoU. But in the real life, some of the people mention MoU but the contain is like a real agreement with a strength legal bindng. That is one example of the mistake.
In an agreement, there are some requirements in order to make it legal and has legally binding. There are two requirements of agreement. The first one is subjective term and the second one is objective term. The subjective term contains two requirements, the first one there’s a meeting of mind which is every party have already agreed with the condition. And the second one, the party is proficient in legal action. For the objective term, there are also two requirements. The first one, in every agreement must be caused by a certain thing, it means that every object has to be clear and obvious. The last one, in every agreement must be caused by legal object and not against the law.
Note: The picture is taken from www.google.com