Knowing the norms and demands of the other party is very important before making any deal. An Agreement outlines these demands and understandings in writing.
Neither party can disagree on the terms after signing the contract. Thus, it provides all the necessary facts about the agreement between both parties.
A MoU is one such document type that shows a clear willingness to proceed with a contract. The full form of a MoU is a Memorandum of Understanding. During the contract negotiations, both parties are prepared to negotiate and will consider each other’s benefits and requirements.
For a document to be validated as a MoU, certain requirements must be met. An MoU must mention the date, provide clarity about finances, etc.
What is the purpose of a Memorandum of Understanding?
In a Memorandum of Understanding, it is specified that an agreement can be reached soon between the parties. Therefore, it implies that both parties are aware of each other’s demands and are ready to respect each other’s requirements.
The same, however, cannot be used as legal force since it is just an announcement of the procedures for reaching a successful agreement.
Due to their ability to be released privately and their ease of writing, they are commonly found in international relationships.
During housing and property agreements, Memoranda of Understanding are usually very useful. While it is not legally binding, it clarifies and states the needs and requirements of both the buyer and the landowner. Aside from the agreement, there can be no hidden fees, facilities, bribes, etc.
Officials prefer MoUs as legal documentation because they are simpler and more flexible than contracts. Although it may not be enforceable, it maintains trust and protects both parties’ interests.
By aligning similar goals between the parties, they can work together on achieving the desired target that overlaps between them. MoUs are also seen as a sign of creativity and analytical thinking for this reason.
MoUs: When should they be used?
A Memorandum of Understanding may be required in various circumstances. Detailed information and demands are included in a simple format. Therefore, many businesses, political parties, or government agencies use memorandums of understanding as legal proof of their corresponding agreements.
Businessmen who are looking for a partner or a supplier who can supply their company with the right commodities can easily utilize an MOU. If this is the case, they can decide how much, for how long, and at what rate the supplier will offer the assets. It is also possible to sign an MoU between both parties stating what they want from this agreement.
The governments of two states also use such signed agreements to maintain a clear conclusion when they work together on a single project. In addition to domestic settlements, they are frequently used in international treaties.
The United Nations Treaty Collection examines such documents to determine their authenticity before declaring them legal.
It is not possible to set a deadline or validate an MoU. The legal documentation remains valid as long as all of the parties’ interests and goals are met. If an MoU is legally binding, all participants have equal rights to go to court if the agreement is violated.
A MoU’s advantages
* Goals with clarity: There are many times when the terms of an agreement are unclear, which may result in conflict in the future. Therefore, it is crucial to have clear intentions and objectives before signing any legal document. It provides a platform for participants to acknowledge the stipulations of each other.
* An outline for a contract: A memorandum of understanding also serves as a blueprint for a contract. An MoU may be a good alternative to a legal contract before signing one. The contract contains all the important information and, therefore, can be altered before being printed.
* Reduces uncertainty: Both parties may find it difficult to understand terms and conditions at first. In order to move forward, it is necessary to clear up all the confusion from the recent phase. An MoU reveals all the terms of the agreement, and all participants can see what the objectives are, how long it will last, how much it will cost, who the partners are, etc.
As a result, the chance for partners to leave the deal is reduced, thus eliminating contract uncertainty.
* Easily exitable: The process of exiting a legal contract can be complicated at times, but the process of exiting an MOU is relatively straightforward. To end an MoU, you do not need to pay a fine or follow any legal procedures. If a party does not agree with the terms of a MoU, they can easily do the same.
Unenforceable: A MoU cannot be enforced in a civil court since it is not a binding agreement. If a party violates the terms of an MOA (Memorandum of Agreement), serious action can be taken against them in court. However, MoUs do not have such authority.
Terms that are unclear: It is common for a MoU to be accompanied by instructions or disclaimers regarding its legal binding power. The possibility of taking legal action is often stated in documents. A Memorandum of Understanding can therefore be legally enforceable or not. The document must be thoroughly read before signing, and then only the agreement can be signed.
The process of drafting a Memorandum of Understanding isn’t easy. Professional and experienced lawyers should be consulted for a number of critical terms and steps to be performed.