Memorandum of understanding as an initial stage of a transaction
Memorandum of understanding is a documents that recording the intention of 2 or more parties related to a proposed transaction between them. This documents is ussualy serving as an initial commitment outlining the main and basic features of a transaction, and made before they prepare and sign the definitive agreements. An MoU must (i) indentify the parties (b) mention the subject and objective of the transaction (iii) spell out the main and basic terms of the expected transaction (iv) how the transaction will be concluded – stages, period, costs etc (v) statement that mou is not binding unless those otherwise agreed by the parties. Some will say that MOU is not binding, but under the Indonesian laws, title of a documents is not determining the consequence of that particular document. For example, you intend to have a non binding MoU, but in the mou you drafted, you put some where in the documents that all costs for legal due diligence related to the transaction shall be borne 50:50 by the target company and the buyer. The other part of the mou may not be binding, but this particular clause re spliting LDD costs shall bind the parties.