What is a Memorandum of Understanding?
A memorandum of understanding (MoU) is usually an agreement between 2 or more parties. It is not an official and binding contract, but it has a list of requirements and responsibilities set by the parties concerned. An MoU template contains an overview of the agreement between the two entities. A non-binding agreement is relatively flexible. Making an MOU template is usually the first step before forming a formal contract.
In the doctrine, it is accepted that the Memorandum of Understanding, as in the Letters of Intent, is not binding as a rule. The reason for this acceptance is that MOUs usually contain provisions regarding the progress of negotiations.
On the other hand, within the scope of a mutually signed Memorandum of Understanding, it is stated that the parties will conduct contract negotiations in good faith, the information learned during this process will be kept confidential, negotiations will not be carried out with third parties on the same subject, the parties will share the costs arising from the negotiations, and there will be some issues in the content of a final contract to be signed. Regulation may occur. In this case, there is nothing that prevents the specified issues from being binding.
What are the Contents of an MOU?
A Memorandum of Understanding states that a legal agreement will be forthcoming soon. This is faster than other documentation formats.
A Memorandum of Understanding can also be created before the formalities of a contract when an agreement is reached between the parties but still requires written documents.
The Memorandum of Understanding may change and be adapted to the needs of each organization or party. An MOU should specify or explain:
- Who the partners are and their contact information
What they will be working on, the background of the project, and why the MOU is entered
Who will use the scope of the document and the information provided by the MOU
- Activities specified, if predetermined
- Implementation of activities
- Financing issues
- Roles and responsibilities of the parties
- A timeline, if desired
- Agreement period
- Signature and date of signature of all parties accepting the Memorandum of Understanding
MOUs can be valuable documents to get the ball rolling on large projects and can be used in any organization.
What is the purpose of memorandum of understanding?
A Memorandum of Understanding (MOU) is not a legal contract but rather a formal agreement between parties that outlines their business relationship’s general terms and conditions. A Memorandum of Understanding (MOU) can help set the strategic direction for a new collaboration between organizational partners and identify goals, time frames, and roles.
Is an MOU legally binding?
The Memorandum of Understanding is not a binding document, and there is no specific definition of the term. However, if it resembles a contract, its contents may become binding and enforceable.
What is the difference between an MOA and MOU?
An MOA is a contract signed by two or more parties that outline the intention of sharing information, working together, creating agreements, and much more. The MOA is different from the MOU in that an MOU is not legally binding.
How Does a Memorandum of Understanding Work?
Preparing a Memorandum of Understanding is difficult, especially if you are not a legal expert. Before preparing the document, the parties who are creating a memorandum of understanding must reach an understanding that all parties accept. Everyone involved should have clear information about the essential stances each party holds. This way, the parties can create a complete and effective MOU document.
To create a memorandum of understanding (MOU) with another party, you first need to make sure your goal is stated clearly in the document.
- Here are some details:
- Ideal expectancies
- Desired effects
- Any vital effects that they could now no longer compromise on
- How they consider the opposite stakeholders can enjoy the memorandum of understanding
While an MOU template appears to be a basic document, it is actually very complicated to draft. Firstly, both parties need to make sure that they have the same agenda in mind. Before creating an MOU template, each party would start with a planning phase.