Memorandum of Understanding


Package Inclusion :

  • Terms and Condition Definition.
  • Industry specific MOU.
  • TAT 3 days.

Memorandum of Understanding

What Is The Memorandum of Understanding?

A Memorandum of Understanding between organizations is like an agreement which is maintained in the document but it’s not like binding the parties. Memorandum of Understanding consist the key points of an agreement between the parties who are involved in negotiating the contract.

The Memorandum of Understanding is just the understanding document which is signed by the parties before the final contract. Undoubtedly negotiations can be very long driven, it is necessary to make clear points on what is being finalized or sorted out by both the parties.

What is the Purpose behind Writing a Memorandum of Understanding?

Once the negotiation is wrapping among the members of the parties, you only have a verbal agreement and hence which is why memorandum of understanding is created to capture all that has been agreed between the parties.

Have a look at the following purpose that makes a memorandum of understanding essential:-

In some complex transactions, parties may reach an agreement which is not enforceable and is applicable as per the circumstances. Such a preliminary agreement can be considered as the Memorandum of Understanding, Letter of Intent. Memorandum of understanding might be useful when a specific real issue, such as getting an authorization from the government is required.

Who should write memorandum of understanding?

Memorandum of Understanding plays a vital role in specifying the different issues such as final price, when & how the delivery will occur, terms & conditions, specific products and services etc among the parties. Make sure that the task of the memorandum of understanding is to maintain the agreement and decisions on both the sides. Instead of using complex language it should be written in plain words keeping in mind that the main purpose is to maintain the same legitimacy that a verbal agreement would have.

How to use a Memorandum of Understanding?

Once the memorandum of understanding has been written don’t immediately show it to the other party members. Pause for a moment and let your team to have a look at it so that any error could be corrected and this will help you to appear more credible. In every negotiation there are some aspects that might not have been resolved, you can leave them out of the memorandum of understanding. When an agreement has been finalized after a principled statement of negotiation, it's an ideal opportunity to record on document what has been consented for.

The memorandum of understanding is the final document that is made to confirm that both the parties have genuinely achieved an agreement with mutual consent. Preparing Memorandum of Understanding is not considerably harder than it looks, rather it needs attention. It must cover the essential parts of the conversation by understanding the negotiation and their agreement over the final value, the products, services, how to deliver the product and much more. Once the memorandum of understanding is created it will keep the other side members to attempt for making any changes in the terms and conditions of the memorandum of understanding.

Why Memorandum of Understanding is required?

You might have heard about many negotiations that after some time of agreement got unraveled. What may be the possible cause for such a deal that was about to be finalized get a fall through? What is being missed? When parties are having their conversation or negotiation over some point then its all comes under a verbal agreement, the missing part is written documentation that both the sides require to agree upon. Peoples usually forgot few points that have been discussed or about what was agreed and what was not, which is why the problem occurs and a verbal agreement leads to a failure. In order to avoid this letter of intent or memorandum of understanding is required so that both the parties may believe that what they have agreed upon. A good negotiator knows the value of memorandum of understanding.

What is Exclusive or Non-Exclusive memorandum of understanding?

A memorandum of understanding can be elite or non-elite both. When exclusive MOU is prepared then parties are kept restrained from agreeing with a similar memorandum of understanding with other entities until the term of first MOU is finished. Whereas on the other hand for non-exclusive MOU the parties are allowed to enter into another similar Memorandum of Understanding with other entity. If in case, you are uneasy that your rivals may likewise approach your party and may begin transactions with them, then in this you can go into a MoU on a selective premise with another party. This would imply that amid the term of the Memorandum of Understanding, your party is banished from consulting with some other entity.

What Is The Role of Confidentiality in MOU?

It is essential to understand and analyze the nature and present state of other party with which you are going to negotiate. We all are aware that no party invests without gaining complete knowledge about the other party which is going to invest with you. If you want to make sure that your information have not been shared with your rival parties then a very important clause known as comprehensive confidentiality must be included in every memorandum of understanding. Before writing a memorandum of agreement you must point a clause which states that all the statements exchanged between the parties will be kept confidential and will never be disclosed in the public. MoU could be a one page document as well as it could contain several pages there is not a specific format or it. The contents and its form is completely dependent upon the deal that you are going to present the agreement with your clients. It make sure that after signing an MOU, parties cannot back out of a deal under any circumstances without facing any consequences.

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