Risk Sharing– Risk sharing is another one of the most important aspects of an MOU.Financial Arrangements– In this section, the parties should be specific about who will pay for what, when those payments are due, and who will be receiving those payments.This is the section where it would be prudent to note what it is the project is supposed to accomplish, as well as what it is not supposed to accomplish. Disclaimers– If there are any disclaimers that should be mentioned in the MOU, then a separate section should be created to outline them.Therefore, this will probably be the lengthiest section of any MOU. This is perhaps the most important section of the MOU because it is essentially the reason why the MOU is drafted in the first place. Shared responsibilities should be included here as well, not just individual ones. Responsibilities– Everyone’s responsibilities and duties should be thoroughly detailed in this section of the MOU so that there are no misunderstandings insofar as who is responsible for doing what. Time Period– The exact time period of the project should be specified, with both start and end dates.Parties to the Agreement– All who are involved in the agreement should be specified within the Memorandum of Understanding.Nothing should be assumed, and there should be no gray area here. The overall intent clause must be an exact and clear reflection of the aims of all parties to the agreement. Overall Intent– An example of a Memorandum of Understanding that is well-written is one that begins by outlining the intentions of all who are involved.However, the following elements are general enough and important enough to potentially be included in most MOUs: If anyone refuses to put anything in writing, then that is a major red flag that should tell everyone involved in the project that perhaps they should not go forward with the arrangement.Įvery situation, as well as the parties to it, is unique, and thus so is a Memorandum of Understanding. For example, a Memorandum of Understanding will cover the types of insurance the parties have, including liability insurance, as well as the promises everyone is willing to make and everyone’s level of commitment to the project at hand. How to Write a Memorandum of UnderstandingĪn effective Memorandum of Understanding prevents misunderstandings and potential disputes by clearly laying out the expectations and responsibilities of all parties to the agreement. An agreement is made with the express intention to take the other party to court, should the other party breach the terms of the agreement in any way. The major difference between an agreement and an MOU is that parties will typically go for a MOU if they have no interest in ever involving a court in their affairs. In the event that one party fails to fulfill his end of the agreement, then the other party can take him to court to sue for damages. A MOU will generally refer to and set out a time frame for the parties to enter into a final binding and legally enforceable contract.Īn agreement is more straightforward than an MOU in that once an offer is made by one party and accepted by the other, the agreement then becomes a binding promise that the parties have agreed upon. A MOU is generally not binding or enforceable in a court of law. This includes: an offer acceptance of that offer intentions for the project and payment or ‘consideration’ of the terms of the project. In essence a MOU is outline or proposed understanding to something two parties agree to but have not formally committed to or detailed the specific responsibilities of each party. The following outlines the key concepts in an MOU.Ī MOU describes the terms of an agreement without being legally binding or involving the transfer of finances. An MOU is more of a promise, whereas a contract is a commitment. While a MOU is a kind of agreement, there are actually several differences between a Memorandum of Understanding and a formal agreement. A Memorandum of Understanding (“MOU”) is a nonbinding written document that states the responsibilities of each party to an agreement or contract, before the official contract is drafted.
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