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A Preliminary Agreement acts as a stepping stone before signing a final contract under Indonesian law. It outlines the key terms and basic understanding between parties who plan to enter into a more detailed agreement later. Think of it as a roadmap that captures the main points both sides have agreed on so far.

In Indonesian business practice, these agreements often take the form of a Memorandum of Understanding (MoU) or Letter of Intent (LoI). While not always legally binding, they help prevent misunderstandings and guide negotiations forward. Companies often use them for joint ventures, property developments, or major business deals where complex details need time to work out.

Use a Preliminary Agreement when starting complex business negotiations in Indonesia, especially for deals that need careful planning and multiple approval stages. This document proves especially valuable for joint ventures, real estate developments, or major commercial partnerships where you need to lock in basic terms while working out the details.

The timing is crucial - create one after initial discussions show promise but before investing significant resources. Indonesian companies often use these agreements during merger talks, infrastructure projects, or when foreign investors need time for due diligence. It helps maintain momentum while protecting both parties' interests during extended negotiations.

• Memorandum of Understanding (MoU): The most common type in Indonesia, outlining basic terms without strict binding obligations
• Letter of Intent (LoI): A more focused agreement stating serious intention to proceed with specific business terms
• Term Sheet: Used mainly in investment deals, listing key financial and operational points
• Heads of Agreement: Detailed preliminary framework popular in property and construction projects
• Pre-Contract Agreement: A near-final document that includes most material terms, serving as a bridge to the final contract

• Business Owners and CEOs: Lead negotiations and set strategic direction for Preliminary Agreements, especially in joint ventures or major partnerships
• Corporate Legal Teams: Draft and review terms, ensure compliance with Indonesian law, and protect company interests
• Investment Firms: Use these agreements during due diligence phases of potential acquisitions or funding rounds
• Property Developers: Structure initial terms for large-scale development projects and land acquisitions
• Foreign Investors: Establish framework for Indonesian market entry while navigating local business regulations

• Basic Information: Gather full legal names, addresses, and registration details of all parties involved
• Deal Scope: Define clear objectives, timeline, and expected outcomes of the future agreement
• Key Terms: List essential business points, proposed financial arrangements, and any deal-breaker conditions
• Confidentiality Needs: Identify sensitive information requiring protection during negotiations
• Legal Requirements: Check Indonesian regulatory compliance, especially for foreign investment or restricted sectors
• Documentation: Use our platform to generate a legally sound Preliminary Agreement that includes all mandatory elements

• Party Details: Full legal names, addresses, and authorized representatives of all parties
• Purpose Statement: Clear description of intended business relationship and future agreement goals
• Duration Clause: Specific timeframe for negotiations and validity period
• Binding Terms: Clear distinction between binding and non-binding provisions under Indonesian law
• Confidentiality: Protection of sensitive information exchanged during negotiations
• Governing Law: Express choice of Indonesian law and jurisdiction
• Termination Rights: Conditions for ending negotiations without liability
• Signature Block: Space for authorized signatures with company stamps

A Preliminary Agreement differs significantly from an Acquisition Agreement in both scope and legal effect under Indonesian law. While both documents play crucial roles in business transactions, they serve distinct purposes and come into play at different stages.

• Binding Nature: Preliminary Agreements typically contain both binding and non-binding elements, while Acquisition Agreements are fully binding legal contracts
• Timing: Preliminary Agreements initiate negotiations and outline basic terms, whereas Acquisition Agreements finalize the complete transaction details
• Detail Level: Preliminary Agreements cover broad principles and basic terms, while Acquisition Agreements include comprehensive legal, financial, and operational specifics
• Due Diligence: Preliminary Agreements often facilitate the due diligence process, while Acquisition Agreements reflect completed due diligence findings
• Risk Allocation: Acquisition Agreements contain detailed warranties and indemnities, while Preliminary Agreements typically limit liability during negotiations