A Memorandum of understanding (MOU or MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It most often is used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforcement agreement. It is a more formal alternative to a gentlemen’s agreement.
A Memorandum of Understanding or MOU is put in place to establish a clear understanding of how the deal will practically function and each party’s role and compensation.
A MOU must
(a) Identify the contracting parties
(b) Spell out the subject matter of the agreement and its objectives
(c) Summarize the essential terms of the agreement, and
(d) must be signed by the contracting parties.
In international public law, a memorandum of understanding is used frequently. It has many practical advantages when compared with treaties. When dealing with sensitive or private issues, a memorandum of understanding can be kept confidential, while a treaty cannot.
How MOU is Different from Agreement
MOU is like a contract, but it does not have to carry the same legal weight. If the wordings used in the MOU are vague and unclear and do not create any binding effect, then the same cannot be enforced. It does not create a valid contract. But if one party do anything on reliance of MOU and sustains any loss he can recover back losses but cannot get enforce the MOU. Both Parties of MOU are bind by estoppels and any of them cannot take adverse stand.
A memorandum of understanding is an agreement between two parties in the form of a legal document. It is not fully binding in the way that a contract is, but it is stronger and more formal than a traditional gentleman’s agreement. Sometimes, a memorandum of understanding is used as a synonym for a letter of intent, particularly in private law. A letter of intent expresses an interest in performing a service or taking part in an activity, but does not legally obligate either party.
While, Agreement contains proposal and its acceptance and intention of parties is to bind each other with the terms of agreement. It is intention of parties that if any one violet the terms other will go to court and get it enforced.
Implementation of MoU in Transnational dealings
In international public law, a memorandum of understanding is used frequently. It has many practical advantages when compared with treaties. When dealing with sensitive or private issues, a memorandum of understanding can be kept confidential, while a treaty cannot. The other advantage of MoUs over more formal instruments is that, because obligations under international law may be avoided, they can be put into effect in most countries without requiring parliamentary approval.
A memorandum of understanding can also be put into effect in a timelier manner than a treaty, because it doesn’t require ratification. In addition, a memorandum of understanding can be modified without lengthy negotiations. This is especially useful, except in multilateral situations. In fact, most transnational aviation agreements are a type of memorandum of understanding.
Legal Ramifications of an MOU
An MOU signals a legal contract is imminent. However, an MOU itself is not legally defensible but should still clearly outline specific points of an understanding. An MOU should describe who the parties are, what the project is they are agreeing on, the scope of the document, each parties’ roles and responsibilities and more. While an MOU is not legally binding, it can help two parties move in the right direction toward an agreement.
An MOU, while not an enforceable document, still holds a lot of power because of the time, energy and resources needed to draft an effective and fair document. An MOU forces the participating parties to reach a semblance of a mutual understanding, and in the process, the two sides naturally mediate and figure out what is most important in moving toward an eventual future agreement that benefits both sides.
Basic Process for Drafting an MOU
Each party starts with a planning phase where it decides what is wanted or desired, what can be offered, what is willing to be negotiated and what is off the table. An initial draft is then written, after which representatives from each party meet to discuss the details. MOUs often list communication expectations to help mediate the sides.
During this time, agreements regarding the timeline for when the MOU takes effect are discussed. Agreements outlining how or when a party can terminate the understanding are also decided. This is when a party puts in disclaimers, restrictions or privacy statements, as desired. Once discussions are finished, a final MOU is drafted and signed.