Definition of MoU and Its Essential Functions and Examples

There are many things that you need to prepare before collaborating with other parties, one of which is making a memorandum of understanding (MoU). A memorandum of understanding is an important document because it states a cooperation agreement between you and an external party.

Of course, you need to learn how to make a good memorandum of understanding so that it is easily understood by both parties. AdIns will explain the definition of an MoU and provide several examples of memorandums of understanding that you can use.

What is a Memorandum of Understanding?

MoU is a document used to express a professional agreement between two or more parties. This document is not legally binding, but it can indicate a commitment between several parties involved to work together on a project or activity. You can use a memorandum of understanding in various fields, such as business, education, social affairs, and many others.

The parties involved in a memorandum of understanding do not have to be fellow companies. You can also create a memorandum of understanding to work with governments, educational institutions, non-profit organizations, and more. You can still use a memorandum of understanding to create a more formal cooperation agreement, even if the MoU itself is not legally binding.

Read also: Know the Differences Between MoU dan Agreement to Prevent Misunderstandings

Purpose of Creating a Memorandum of Understanding

As we explained, an MoU has an important purpose in declaring a cooperation agreement between the involved parties. These objectives include:

1. Simplifying the Cancellation of a Deal

The MoU is not a final and binding agreement, but only an illustration of the agreement that will be enforced in cooperation. If the business prospects in the business plan are still unclear, one of the parties can easily cancel the cooperation agreement even though it can be followed up.

2. Temporarily Binding Other Parties

A memorandum of understanding can also be a document that temporarily binds the other party. The reason is that signing a cooperation contract requires a lot of time and involves a lengthy negotiation process. Memorandums of understanding can maintain the relationship with the parties invited to work together until the contract comes into effect.

3. Consideration for a Deal

Sometimes other parties still have doubts about the cooperation plan. The memorandum of understanding can be used as material for their consideration in agreeing or rejecting the agreement in cooperation according to the written clause.

Read also: Differences Between Initials and Signatures That You Need to Know

Characteristics of a Memorandum of Understanding

An MoU has characteristics that make them distinctive compared to other types of letters. What are the characteristics?

• It contains the willingness of several parties to cooperate.
• Briefly made.
• It only contains basic and general matters as an expression of willingness for both parties to cooperate.
• Not binding so as not to force the parties involved to carry out their obligations.
• Only valid for a while until there is an agreement. If both parties agree, the memorandum of understanding can be extended and you can enter into a contract. Conversely, the memorandum of understanding will be void if there is no continuation regarding cooperation.
• Does not emphasize legal sanctions.

Read also: Signature Forgery: How to Report and Legal Sanctions

Examples of a Memorandum of Understanding

Now, we assume that you already know the definition and characteristics of a memorandum of understanding. There are two examples of memorandum of understanding that you can use, such as a simple memorandum of understanding and a business cooperation memorandum of understanding. The following is an example of each memorandum of understanding.

1. Simple Memorandum of Understanding

MEMORANDUM OF UNDERSTANDING

(MEMORANDUM OF UNDERSTANDING)

On this day …………….. date …………….. month …………….. year …………….., each of the undersigned parties:

1. Name: ……………..……………..……………..……………..……………..

Job Title: ……………..……………..……………..……………..……………..

Address: ……………..……………..……………..……………..……………..

Number: …………….. in this case acting for and on behalf of themself, hereinafter referred to in this agreement as the FIRST PARTY.

2. Name: ……………..……………..……………..……………..……………..

Job Title: ……………..……………..……………..……………..……………..

Address: ……………..……………..……………..……………..……………..

Based on the ID card: ……………..…………….. Number: …………….. in this case acting for and on behalf of themself, hereinafter referred to as the SECOND PARTY.

Both parties agreed to carry out the cooperation as outlined in the cooperation agreement text with the following conditions:

1. ……………………..

2. …………………….

3. ……………………..

FIRST PARTY SECOND PARTY

(…………………..)                                                                          (…………………)

2. Business Cooperation Memorandum of Understanding

MEMORANDUM OF UNDERSTANDING

(MEMORANDUM OF UNDERSTANDING)

BETWEEN

……………..…………….. INC.

AND

……………..…………….. INC.

Number: ……………..……………..……………..

On this day, …………….. date …………….., a joint memorandum of understanding has been signed, hereinafter referred to as the memorandum of understanding by and between:

Name: ……………..……………..……………..……………..

Job Title: ……………..……………..

Address: ……………..……………..……………..……………..

In this regard acting for and on behalf of …………….. Inc. located in ……………..…………….. according to Act No. …………….. date ……………. made by Notary …………….. located in …………….. and hereinafter referred to as the FIRST PARTY.  

Name: ……………..……………..……………..……………..

Job Title: ……………..……………..

Address: ……………..……………..……………..……………..

In this regard acting for and on behalf of …………… Inc. located in …………….. and hereinafter referred to as the SECOND PARTY.

Furthermore, each party hereby explains in advance the following matters:

THE FIRST PARTY is a financial institution in the form of a bank, where the products offered are in the form of raising funds, channeling funds, and other banking services.

THE SECOND PARTY is a financial institution that offers insurance business services.

Concerning the foregoing, the parties agree to implement the provisions of this memorandum of understanding as follows:

Article 1

PURPOSE AND OBJECTIVES

• Both parties agreed to work together for mutual benefit to improve services to the community.
• Both parties agreed to become an interest-free financial institution.

Article 2

TIME FRAME

This cooperation is valid for a period of time for …………….. years starting from …………….. to …………….. and can be renewed according to the agreement of both parties.

Article 3

RIGHTS AND OBLIGATIONS

Each party has the following rights and obligations:

(1) The FIRST PARTY’s obligations include:

Providing investment-based capital in the form of mudharabah financing.

Marketing Takaful Insurance (Bancassurance) products to every interested customer

Marketing Takaful Insurance (Bancassurance) products to every interested customer Issuing a mudharabah deposit account as an investment medium for the SECOND PARTY.

Conduct routine training related to the socialization of banking products.

(2) The obligations of the SECOND PARTY include:

Providing profit sharing for the FIRST PARTY if the insurance company makes a profit.

Provide convenience to customers of …………….. Bank Inc. who want to buy an insurance policy.

Conduct routine training related to the socialization of insurance products.

Article 4

ADDITIONAL PROVISIONS

Whereas regarding matters that are not or have not been sufficiently regulated in this memorandum of understanding, will be provided in the form of an addendum that is an integral part of this memorandum of understanding.

Article 5

CLOSING

This agreement is made in 2 (two) copies, each of which is sufficiently stamped as evidence that has the same legal provisions.

FIRST PARTY SECOND PARTY

(………………….)                                                                         (…………………)

From the example above, you can conclude that the memorandum of understanding requires the signatures of both parties as proof of its validity. The good news is, you don’t need to meet directly with the second party just to sign the memorandum of understanding if they are in an area far from your reach.

The best solution for a memorandum of understanding signing is to use the digital signature application from AdIns! Both you and the other parties can legalize the memorandum of understanding with this application seamlessly. Not only that, but this application is also proven to be secure so you can avoid fraud that could endanger your cooperation. Contact us immediately via WhatsApp and make the MoU signing process easier with AdIns!