What is MOU?

What is MOU?

MOU is defined as consent between two or more parties or between two or more nations that they are going to agree with each other at later stages. An MOU is a formal document between the parties and it does not need to be a legally binding document. The legality of the MOU will depend upon the nature of the scope defined in the MOU, the language of the MOU, and the person who executes the MOU. The MOU mainly defines the intentions of all the parties concerned in the MOU and all future negotiations shall be based upon the terms and conditions of the MOU. Initially, MOUs are signed between two or more countries when they are negotiating some terms with each other but now the business establishments in our country also work on MOU basis....

Full form of MOU

MOU stands for “Memorandum of Understanding”, and in many countries, it is also known as a “Letter of Intent” or “Memorandum of Agreement”. It is a document that contains the points on which the parties who are negotiating have agreed upon. It is a safer option for the parties to have a MOU to proceed with the agreements later on. Not all the MOUs need to be legally binding, but it depends upon various circumstances. MOU outlines all the terms and conditions that the parties have agreed upon in the negotiations....

How does the MOU Work?

A Memorandum of Understanding sets out all the points that the negotiating parties have agreed upon, their responsibilities, and expectations from the other party, and it also promotes that the parties work in the direction to achieve the desired result. The parties cannot use the MOU to create any legal obligation on the other party as it is only a collection of the agreed points during the negotiation between the parties. The parties usually prefer MOUs because it is flexible and very easy to create, and still they cater to the needs of both parties. MOUs records all the conclusion that the parties have formulated after the negotiation and have agreed upon. The terms and conditions that the parties have agreed upon and mentioned in the MOU must be signed by the concerned parties. The parties can make this document enforceable under the law if they follow the conditions mentioned under their contract law....

Contents and Format of MOU

When the parties have reached a stage where they know what to expect from each other and want to execute the MOU by signing the same, they must create a common MOU that has all the intentions of both parties. There are some points that all the MOUs must have discussed below....

When to Use MOU?

The parties can mainly use the Memorandum of Understanding when they want to formally create a primary understanding and structure for working together. MOUs can help the parties create their objectives, responsibilities, and expectations before they have a formal agreement with each other. It helps the businesses to create common terms and conditions for a future partnership. Businesses also use MOUs to save the time, resources, and effort that they will spend while creating an agreement. It sets out the initial terms on which the parties can further negotiate, and if they want they can bind themselves into a formal agreement. When a company wants to close an agreement with another company but is not very certain because of their verbal commitments, they can enter into a MOU. The parties often tend to enter into an MOU when they are dealing with any governmental organisation, as it keeps them on the safer side if the negotiations are documented....

Purpose of MOU

1. Documentation: The main purpose of the MOU is to document everything that the parties have agreed upon during the negotiation....

Advantages of MOU

1. Curtails the Risk of Uncertainty: It clearly defines each party’s goals and objectives and removes any risk of uncertainty in understanding the goals of the parties. Both parties will have a proper understanding of the objectives and goals of the MOU....

Disadvantages of MOU

1. Not Enforceable: The main disadvantage of an MOU is that it is not a legally enforceable document. An MOU does not fulfil all the validity of a valid agreement. Hence, it is not accepted as a legally enforceable document. Any party cannot challenge the validity of the same in a court of law....