The following blog explains the purpose of writing a memorandum of understanding. It further discusses whether an MOU is a legally binding document and how one should write a Memorandum of Understanding (MOU).
Contents of Memorandum of Understanding: A memorandum of understanding is signed by organizations, institutions, and individuals in a business partnership with one or more firms, all of who/ which mutually agree on the project’s intent, without any coercion and out of their free will to work together on a common plan. Despite not being a legal record, it is an outline of the varying degree of responsibility and investment in the project undertaken; hence, it demands some serious effort for the formularisation of the same. Before the discussion about the subject or plan of action begins, the agenda may also involve signing a confidentiality document or a non-disclosure agreement in certain cases. This could be in the interests of either party. However, mutual respect and consideration should be expected and offered.
The beginning of a plan could bring to the front the multifarious characteristics of a project born out of a coalition of thoughts, time, efforts, investment, and thought processes of two or more parties. Hence, the Memorandum of Understanding also ensures that both parties agree to incorporate the exchanged information into the discussion to encourage a broader purpose to the project they have jointly agreed to see to completion. Working on a common goal can be tricky, given the mind timelines of the companies involved, each formularizing a robust plan of their own without adequate discussion or engagement.
What is the Right Way to Draft an MOU?
Some very basic things need to be kept in mind while drafting a Memorandum of Understanding: key elements of the projects, the ones who undertake it, relevant information on their identity details, etc.
The contents Memorandum of Understanding can be enlisted as below:
- Every Memorandum of Understanding must first clearly specify which parties have entered the agreement together. This is necessary because it shows that the MOU was made, keeping in mind their interest in joining hands for a project and seeing it to completion. This does not leave any of the parties in disarray if the other(s) fail to acknowledge the significance of the coalition.
- The Memorandum of Understanding should specify and mention every line of identity details that one organization may demand of its companion organization, be it for credibility or specificity. That should include the Name of the organization, Name of a project undertaken, address, ZIP code, Nationality etc.
- The memorandum of understanding should then go ahead to discuss at length the purpose of the alliance of the two or more companies. It could be the details of the project, information that is withheld otherwise should be written as such, common interests, motive, goals, symbiosis, etc.
- The tenure of the agreement should also find its place in the topmost and primarily discussed things in the Memorandum of Understanding. It could be a fixed but tentatively fixed period of a few experimental years and then can be renewed after the specified time if both companies will pursue it for longer. The memorandum contains the Date signed by the trained representatives as the start of the duration of the agreement and specifies a term for the pact, and hence, the exact end date too.
- It is of utmost importance for a Memorandum of Understanding to discuss plans and back-ups for unforeseen contingencies. It should also describe a potential falling out of the parties in agreement, discrepancies in the plan of action, and how it will turn out in each of their interests. It also explains under what consequences the memorandum stands for chances of getting terminated.
- The memorandum also necessitates meeting and updating the work and progression of the Plan of Action into something fruitful. Each party that invests in the project is entitled to ask for accountability from other parties involved. Hence, meeting and reporting certain details or information exchange that has been vested with only one or a portion of the working individuals in a plan is very important. It keeps the transparency, purpose, and progress of the project clear.
- The MoU Agreement may make mention the financial investments made by each of the involved companies, be it regular, advanced investments, outstanding, etc.
- Risk management, recuperation of a sinking plan, joined efforts in turning a situation around if an ominous occurrence in a business plan or strategy is deemed as imminent.
- Finally, a consenting signature completes the Memorandum of Understanding, showing complete and unequivocal congruence of the opinions of both parties involved.
Free Samples of Contents of Memorandum of Understanding
Sample 1 Of Contents of Memorandum of Understanding:
(Private Sector)
This Memorandum of Understanding (MOU) is between the <Name of First Party> and Member <Name of Second party/ Multiple Parties>. This agreement enlists and elaborates the vision of the venture and the responsibilities of each of the partaking <organizations/ individuals/ enterprises/ business companies> for participation in the < Name of project > joint program.
It should be noted that the parties involved in the agreement have shown congruity in intent as well as with the clauses and content that have been mentioned below:
- Tenure: This Memorandum of Understanding is effective upon signing on <Starting Date> and shall be over after <Ending Date> / is non-expiring.
- Principles: A briefing of the idea or purpose, the joint intent, the reason behind the coalition and all the results it entails or is expected to.
- Risk Management: This confers upon the respective parties the capability and the facility to enhance the existing state of affairs and improve/ better them by handling the liabilities, risks, and unprecedented situations effectively, with and/ or without each other. This could be an individual responsibility or of the aggregate, but it shall execute in the interests of all involved.
The parties have mutually agreed on the project’s intent, without any coercion and out of their free will to work together on a common plan.
The agenda involves the signing of a <confidentiality document> or a <non-disclosure agreement>, presently in the interest of <Name of Party or Parties> if the proceedings or the project is not for everyone to know, or some aspects of information about the same, need to be withheld.
A. Agenda 1
B. Plan of Action
C. Goals 1, 2, 3
Signature of both parties signing, location Details, if needed
Sample 2 of Contents of Memorandum of Understanding
(Governmental Sector)
MEMORANDUM OF UNDERSTANDING / AGREEMENT
1. This Memorandum of Undertaking is made on this day, the < Date- which will also be considered as the start date> between <Name of First Party> having its office at <Address of the First Party– organization, institution or business with its ZIP code, Nationality>, (shall include the signature of a trained, authorized representative of the first organization which is a part of this governmental partnership) and <Name of Second Party viz. having its office at <Address or Location of the Second Party’s organization, business or institution with ZIP Code, Nationality> (shall include the signature of a trained, authorized representative of the second organization which is a part of this governmental partnership) and the Government of India.
2. The programme for which this Memorandum of Understanding has been agreed to be signed is known as <Name of the Project> under the umbrella of projects facilitated by the Government of India.
3. Description, Purpose and tenure of the Project. The main points are agreement in risk management, the enunciation of funds invested and elementary steps taken by all the parties involved.
4. This also includes the content as mentioned earlier and clauses. However, this partnership is in the interest of the government and private companies in the agreement.
Date
Signature (All agreeing Parties)
Stamp of the Government of India
Sample 3 of Contents of Memorandum of Understanding
(Bilateral Partnership)
This Memorandum of Understanding (hereafter MOU) has been signed between the <Name of First Party> and the <Name of Second Party> in a project that outlines the motives and vision and constitutes a framework for cooperation between the two parties.
- Article 1
- Description of interests of the first party
- Investments made by the first party
- Description of interests of the second party
- Investments made by the second party
- Signature of trained representatives of both parties
- ZIP, Nationality and Identity Details of both Parties
- Article 2
This Memorandum of Understanding shall remain in force for an initial period of <pre-determined tenure> years from the date of the last signature. After that, it shall be automatically renewed for successive <n>-year periods unless either Party 1 or Party 2 terminates this agreement by giving prior written notice to the other party, with at least a six-month or more window period.
It is imperative for any changes made to the Memorandum of Understanding to be approved, in writing, by both parties (the one which proposes, followed by the one which reviews).
In case of discrepancies or disagreements, the parties should reassess or review their written contract of work, agreement or Memorandum of Understanding, which withholds details of tenure, organizations and the plan of action.
- Article 3
The two parties have mutually consented to seek to achieve the following:
Plan of Action #1
Plan of Action #2
Plan of Action #3
Plan of Action #4
Plan of Action #5
Signatures
Date
Stamp.
Conclusion
The purpose of writing a Memorandum of Understanding is broad because of the need for communication between the parties that enter an agreement. There is often miscommunication or misinterpretation of schemes discussed, and these gaps in comprehension can lead to a grave downslide to plans that were meant to fly high, owing to how impassioned the team executing them is. When the parties are in close contact with each other, bound by some form of agreement, it offers them more space to put their case, ideas, plans, or progress reports in a more well-elucidated way.
Hence, a Memorandum of Understanding is a much easier yet serious way to draft and keep a record of all the important events and occurrences in a business agreement. If have any doubts regarding the contents of memorandum of understanding Vakilsearch can help you with the whole process of writing an MoU. Our experts will make the process hassle-free and swift for you. Hope this blog related to contents of memorandum of understanding was helpful!
