This post covers everything you need to know about memorandum of understanding (MOU) plus a free template
here I will take you through
- what is a memorandum of understanding
- contents of the memorandum of understanding
- template memorandum of understanding
let’s get started
What is a Memorandum of Understanding?
A Memorandum of Understanding (MOU) is a nonbinding legal document that provides the basic terms and conditions for entering into an agreement between two or more people.
This document is important because it provides the roadmap on how a certain transaction will be performed by parties.
An MOU enables parties to be ready for signing a contract by outlining the major ideas and requirements of their agreement, even though it is not legally enforceable.
“I don’t like MOUs because they don’t mean anything,”Donald Trump
For the future signing of a formal contract to go well, it can be crucial to express what each side intends to benefit from an agreement in unambiguous terms.
For example, if two companies want to merge and form a new company, they may prepare the MOU to lay down the terms and conditions of doing the deal.
Contents of memorandum of understanding
The Memorandum of Understanding must include,
- Title of document i.e MEMORANDUM OF UNDERSTANDING
- Name and addresses of the parties
- rights, duties, and responsibilities of the parties
- termination clause
- confidentiality clause
- dispute settlement clause
- force majure
Template memorandum of understanding
The following is the template of the memorandum of understanding.
MEMORANDUM OF UNDERSTANDING (MOU)
This MEMORANDUM OF UNDERSTANDING is made and entered into on …………… day of ……………………. 20.
A AND B OF [INSERT PHYSICAL AND POSTAL ADDRESS] of one part
X AND Y [INSERT PHYSICAL AND POSTAL ADDRESS] of the other part
The parties to this Memorandum of Understanding are individually referred to as the “Party” and collectively referred to as “Parties”
WHEREAS the parties are interested in carrying on a business of………… jointly at ………………………
WHEREAS, this Memorandum of Understanding shall provide for the basic terms and conditions for entering into the agreement.
NOW, THEREFORE, in light of mutual terms and conditions promises contained herein and other good and valuable consideration, the receipt, and sufficiency of which is hereby acknowledged the parties agree as follows:
The main objective of this Memorandum is to agree on……………and promotes…………………………as well, as…………………………
The specific objective of this MOU will be identified by the consultation of parties.
This MOU shall be operational upon signing and will have an initial duration of……year(s). All activities conducted before this date within the vision of the joint collaboration will be deemed to fall under this MOU.
UNDERTAKING BY THE PARTIES
A AND B have agreed to engage in the financing and/or contract financing and technical expertise in regard to the concession.
X AND Y will ensure total compliance with all legal and regulatory requirements by obtaining all relevant permits prior to the commitment of any business
The parties to this Memorandum of Understanding reserve the right to sell their equity stake in the company. The transfer of shares will be in good faith and any prospective buyer will be a party capable of achieving the realization of the Venture.
The failure by either Party to exercise any right, power, or privilege under the terms of this Agreement will not be construed as a waiver of any subsequent or future exercise of that right, power, or privilege or the exercise of any other right, power, or privilege.
REPRESENTATIONS AND WARRANTY
Both Parties represent that they are fully authorized to enter into this Agreement. The performance and obligations of either Party will not violate or infringe upon the rights of any third party or violate any other agreement between the Parties, individually, and any other person, organization, or business or any law or governmental regulation.
Each of the parties shall keep confidential and not without the prior written comment of the other party disclose or divulge to any party the contents of this agreement or any agreement entered into pursuant to this agreement except as may be required.
The parties hereto agree to act in an exclusive arrangement with each other for as long as necessary and economically viable.
In the event of either party commits a breach of any of the provisions of this Memorandum of Understanding, the other party shall without prejudice to other rights and remedies available, have the right to terminate this Memorandum of Understanding, by giving the defaulting a thirty (3) days notice in writing. Specifying inter alia the nature of the alleged default and the intention of termination.
No party shall be liable for any delay, hindrance, or prevention of frustration in the fulfillment of the Memorandum of Understanding by reason of force majeure which shall include but not be limited to war, civil commotion, fire, flood, and earthquake.
The Parties each agree to indemnify and hold harmless the other Party, its respective affiliates, officers, agents, employees, and permitted successors and assigns against any and all claims, losses, damages, liabilities, penalties, punitive damages, expenses, reasonable legal fees and costs of any kind or amount whatsoever, which result from the negligence of or breach of this Agreement by the indemnifying party, its respective successors and assigns that occurs in connection with this Agreement. This section remains in full force and effect even after the termination of the Agreement by its natural termination or the early termination by either party.
DISPUTE RESOLUTION / ARBITRATION
Any dispute, controversy, or claim arising out of or relating to, or in connection with this Memorandum of Understanding or the breach, termination, or validity thereof shall be resolved between the parties amicably.
In the event that the dispute does not get resolved, shall be finally settled by arbitration in accordance with the ………… laws and Rules of Arbitration.
The partners may agree to amend this Memorandum of Understanding, provided
that they support the incorporation of the amendment into this document.
The Parties agree that this Agreement shall be governed by the State and/or Country in which both Parties do business
IN WITNESS whereof the parties have executed this Memorandum of Understanding by their duly authorized representatives, as of the date hereof