MEMORANDUM OF
UNDERSTANDING
Drafting and related matters
What is “MOU”?
• A “MOU” is a document between at least two
parties that explains the proposed agreement
between them. It is a document that brings
together the thoughts and expectations
between the parties before they enter into a
legally binding contract.
Is it a Legal Document?
• A MOU is an informal record, in the form of a
brief written note or outline, of a
particular legal transaction or document for
the purpose of aiding the parties in
remembering particular points or for future
reference.
• A memorandum may be used in court to
prove that a particular contract was made, in
certain matters.
IS a MOU legally binding?
• Unlike a contract, a MOU need not
contain legally enforceable promises.
• While the parties to a contract must intend to
create a legally binding agreement, the
parties to a MOU may intend otherwise.
• If its is required to create legal obligation,
create a Contract/Agreement instead.
WHAT TO INCLUDE IN A MOU
1- The Parties
• Describes the parties to the Memorandum.
• This includes the following information:
- The name of the organization or entity;
- Its commercial form (company or partnership or
individual);
- Its premises;
- Its commercial registry.
• These are the personalities or organizations that’ll be
involved in the agreement, and is not restrictive to a
certain number of persons/organizations as long as all
parties agree on the overall intent of the MOU.
2- The intention of the Parties
• the overall intent of the parties:
• Many MOUs begin with a brief description of
the overall intent of the parties.
• MOUs should have clearly stated clauses that
accurately reflect what the parties are
intending to do to ensure there are no
ulterior(hidden) motives, as they have no
place in effective partnerships.
3- MOU Period/Timeline
• it is important to specify a time period for the
partnership with start and end dates. As
MOU’s are not eternal and everlasting.
• Determine a timeline as to when the
Partnership/Cooperation will begin and when
it will end.
• Be specific and note the dates in the MOU
4- Assignments/Responsibilities:
• This important section of the MOU describes the
duties and responsibilities of each party.
• It is generally more effective to describe each
organization’s responsibilities separately, beginning
with that organization’s sole responsibility.
• List each group’s sole responsibilities, followed by a
description of shared responsibilities, if any.
• In many cases, this section of the Memorandum will be
the most detailed and lengthy. Clarifying
responsibilities is the number one purpose of a written
agreement.
5- Disclaimers
• it is important that MOUs will contain one or
more disclaimers, including one indicating
that employees of Organization A are not to
be considered employees, borrowed or
otherwise, of Organization B and vice versa. It
may also be worthwhile to disclaim what the
partnership is not intended to do, guarantee,
or create.
6- Financial Arrangements:
• Where financial implications are involved in
the overall intent of an MOU, These should be
spelled out in detail including which entity will
pay for each item and when payment is due
and to whom.
7- Risk Sharing:
• A critical element of an MOU is a description of who will bear the
risk of a mishap.
- What if something goes wrong?
- What if the partnership’s activities result in injury, death or a
financial loss?
An organization should never assume responsibility for something over
which it does not have control.
A formal MOU may include a provisional clause, promising that an
Organization will pay for losses suffered by or caused by the other
party.
Ideally, indemnification provisions should be mutual in that each party
will be responsible for its own negligent acts or omissions.
In considering financial implications, make certain your partner is not
only willing but also able to pay for losses it causes.
MOU STRUCTURE
Structure
• Title
• Date
• Parties
• Preamble
• Framework
• Partnership
• Term/Duration
• Legal Effect
• Signature
