How to Draft an MOU

The Memorandum of Understanding is nothing more than the foundation of a legal contract. The agreement is between two or more people laid out in an official written document. The parties can’t determine the contract’s terms and conditions in one day; proper discernment and consideration take place prior to the final MOU draft of the legal agreement. 

An MoU confers the potential obligations of each party when it comes to a formal agreement. It is a declaration, as well as an indication of a contract for the future. 

MoUs are a way to define the terms of the contract. It is written to succinctly define certain obligations and establish an understanding to avoid misconceptions between the parties. Through MoU, parties begin with their respective communication. Each party creates their own MoU that contains details like:

• What will the opposition party provide from their side?
• What are the expectations of other parties?
• Certain non-negotiable terms.

Important Points for draft MOU

Certain points are essential when writing an MoU. These include:

The motivation behind the agreement

Because an MoU draft is designed to express your intentions and expectations, every party is required to follow the process of presenting their argument in a clear and concise manner, making the declaration of the intent of the party essential. It’s the first and most important thing to consider when drafting an MoU. The first clauses in an MoU typically include what the parties hope to gain from this partnership and how they intend to pursue the goal. The precise mention of the intent is a double benefit. It first gives the other party the purpose of the party presenting the MoU and if it is in their best interest to take it further to the next level of an official indenture.

Further, it asserts that the party doesn’t have any other motives. This helps to avoid any shock or surprise for the other party and helps save time due to misinterpretation.

The fundamental reason for the Understanding

The second aspect that must be included within the MoU is its intent. After the parties’ intentions have been clarified, the subsequent step would be to establish how the MoU will help achieve the goal.

However, the MoU isn’t legally binding or enforceable; however, they contain moral or ethical sacredness. So, it is to assume that the parties will behave in accordance with the signed MoU. The purpose section should include an eloquent description of the intent behind the proposed or newly developed capability, which makes the MOU mandatory.

What capabilities does the MOU cover? 

1. What is the desired degree of command?
2. When can it be used?
3. What will it be used for?

Tenure of the Agreement

As such, an MoU is a non-permanent, temporary and binding agreement that provides evidence of the imminent conclusion of the contract.

The specified time frame provides the parties with a specific window for the participant to think about what they want to include and what should be left out of the final agreement, and throughout the period of MoU, the parties can effectively negotiate on it and develop a clear view.

Furthermore, another period to be mentioned in an MoU is the prospective/potential contract duration. Each party needs to be aware of the length of the proposed contract if they intend to sign one. An MoU might include:

• The time that the agreement will last.
• Its terms of renewal.
• The most significant dates of expiration as well as shared information.
• Other events anticipated by the parties will be set in the proposed timeframe to be viewed by the other side.

Good Faith

The very essence of an MoU has a fundamental element of credibility. Because the MoU does not have legal force and relies on the doctrine of moral and ethical sacredness to ensure that there is no point in the pursuit of the MoU, the parties agree to be sincere, honest and conduct negotiations with integrity. In the long term, all parties have a conviction that they are all working towards an agreed-upon purpose. This is the first step in creating an official and legal contract.

Thus, the rationale behind writing such an undertaking is that the moment you have a written agreement written down, it impacts the person signing it and impedes breaking an agreement. Additionally, it’s evidential proof of the person’s honesty.

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A list of the responsibilities to be included

This crucial part of the MoU clarifies each party’s obligations. This section provides a detailed explanation of the way in which the terms of the agreement are to be implemented in practice and assigns responsibilities to each party. It gives an understanding of the nature of the terms of the contract. This applies to everyone who is involved during a business negotiation. It could identify the obligations and roles of each participant and the extent of these obligations based on the individual’s skills. The MoU must outline all parties’ due diligence.

Additionally, all contact information must be up-to-date. It is usually recommended to define the obligations of each party. This typically covers:

1. Create an outline of the responsibilities that are only the responsibility of a single party.
2. In addition, it is important to list the responsibilities to be shared between both parties.
3. What are the consequences in the event of a denial of these obligations?
4. High stake business agreements include a mechanism to ensure the accomplishment of these obligations.
5. The MoU could also specify the party with authority to make the final decision. 
6. If, at any point, the initial agreement doesn’t work and the parties are caught in disagreement, the MoU should include a procedure that is laid out to settle disputes.
7. When financial implications are included in the general purpose of an MOU, they must be explained in full detail, including who will be responsible for each item and the date when payment is due and to who.

 In the end, knowing each partner’s duties is among the primary motives behind the signing of an MoU.

Disclaimer

An MoU is about establishing the illusion of transparency and dispelling any preconceived notions that are false. When the obligations and other clauses are agreed upon, it is essential to eliminate the chance of confusion about the meaning of the agreement. That is the reason it is essential to ensure that an MoU includes a few disclaimers. One of them is a crucial one that states that employees from Organization A are not to be considered employees, whether borrowed or otherwise or employees of Organisation B and reversed. It could also be beneficial to state what the partnership has not meant to do or to guarantee or create. However, it is worth it that the parties who sign the MoU are not planning to sign a legally binding agreement, but considering the nature and the parties of the MoU, in the interest of simplicity, the clause included in the disclaimer section.

Signatures

The last part of MoU should include an area for signatures, in which the representative of each side signs and affirms their agreement to the proposed MoU and a copy of the MoU is provided to each of the parties for an individual record.

Conclusion

So the MoU is a means for negotiation. One of the disadvantages when signing an MoU is that it will not be enforceable in the event that parties break their promises and wordings stipulated within the MoU. The MoU is not a legally binding and enforceable agreement. Still, it can open the door to potential negotiations, and ultimately, if all is in order, it will lead to the conclusion of an agreement. It’s a means to acknowledge the intention for parties to form an agreement in the near future and also a formal way to begin a dialogue in the negotiations on the terms of an upcoming contract.