MOU

Process of Signing of a Memorandum of Understanding

Introduction

A Memorandum of Understanding, though not a legal document, is a valid and unequivocal agreement of purpose and acknowledgment of the concordant motives of both (or more) parties who agree. The impetus that sets off a task in its line of action is based on the contents of the Memorandum of Understanding, in the way of concurrence or accordance with the aims of the mutually signed understanding, that in turn reflects the purpose of many business opportunities negotiations and pacts of that order. 

When two or more parties start a conjoined effort, certain things need to be palatably presented, such as demands, expectations, goals, and the likes. This helps everyone involved in the project know what to expect and what to work on to expect support and avoid unfortunate internal discrepancies which could lead to the falling through of the concerning project or its plan of action.

Process of Signing of a Memorandum of Understanding

Specific obvious pre-requisites and guidelines are listed involved in signing a Memorandum of Understanding by two or more parties.

The terms and conditions, though essential but an official declaration of the collaboration, are as follows:

  • To sign an MOU, the parties shall mutually agree on the project’s intent without coercion and out of their free will to work together on a common plan.
  • Before the discussion about the subject or plan of action begins, the schedule involves the signing of a confidentiality document or a non-disclosure agreement in some instances, if the proceedings or the project is not for everyone to know, or some aspects of information about the same, need to be withheld. This could be in the interests of either party.
  • However, mutual respect and consideration are expected.The beginning of a plan could bring to the fore the multi-faceted characteristics of a project born out of a coalition of thoughts and 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.

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Moving on, this makes discussing the contents of a Memorandum of Understanding imperative.

Contents of a Memorandum of Understanding

An MOU should mention the following: the parties involved, the content of the agreement, the specified date of when the MoU will become effective, all the contact details of the relevant parties, the broad prospect of the agreement, and what the parties are hoping for achieving along with the space for all required signatures.

The contents of a Memorandum of Understanding are around and about the field of action; it enlists the specificities of the parties involved, the events already agreed upon, potential milestones of the project undertaken, and so on. Contents are a key element in rendering a simply officiated memorandum into something legal if the clause involved in the content list incorporates a legally binding one. The parties concerned shall be the ones to incorporate it, so there wouldn’t be a scope of unconsented involvement of any provision in section or subsection, which is likely to go against the unanimity of agreement of the parties.

The Memorandum of Understanding states non-disputably the state of affairs regarding the agreement and the project.

∙ It further sheds some light on the purpose of the coalition and the surmised or apparent result of the same. Unambiguity in language, clear points of interest, and intent of the project and institutions involved, make for the ideal contents of interests. 

The Memorandum of Understanding specifies the essential identity details of both (or as many) parties involved in the agreement and exclusive details, if any, regarding them. The minimum requirement of information that shall be deemed as valid and enough from each of the parties is- the name of the respective organisations, their place of work (headquarters, offices etc.), countries, and other third-party vendor companies that the concerning companies might frequently associate to in terms of work, management or trade.

The parties involved should have a fixed or pre-determined tenure to the projects that they have initiated work on. The coalition is most certainly not indefinite. The parties are not obliged to follow the memorandum of understanding post the term specified and agreed upon by the partakers. With a timeline, the projects will inevitably build themselves around a routine and arranged to be complete before the discussed date of expiration of the tenure.

Entering an agreement and signing a memorandum of understanding could demand time as well as a great monetary investment. Hence, the demarcation of funds that the parties choose to or are required to invest into the project should be drafted in the content list under the finances. Since there could be a few negotiations, exchanges, or offers made, the details about finances should be regularly updated.

∙ With great undertaking comes great responsibility. As more than one party is involved in signing a memorandum of understanding, the individual or organisations from the different parties are needed to be accountable to each other for transparency and comprehension of the situations at hand. The responsibility shall be assigned and expected to yield as indicative of the accountability each party owes to the companion party. This creates an efficient partnership and obliges the parties to make joint efforts to recuperate a situation, if necessary.

∙ Business negotiations and new projects entail quite a few risks that most people self-verify their agreeability to. However, when it involves more than one party (two or more), the risks could be a shared issue because the losses incurred by one wouldn’t take a hit on just their part of investments made, but quite the contrary. It accounts for risk-sharing. Risk management should be a group target as much as the project. Many times, strategising could go immensely wrong, and the damage control would require all the partakers to offer voluntary support to minimise the potential harm of the action, mend and amend. Unanticipated and unpredicted risks are also mentioned under unseen yet unfavourable contingencies.

∙ Each party (individual, head, or chosen party representative) should duly sign in the memorandum of understanding, hence accepting and vouching to show their approval and acquaintance with legal clauses included, if any. Potential risk and financial partnership, and other important involvements of support are deemed important in the Memorandum of Understanding.

When a business venture or project is a joint party effort, it essentially means that relevant outcomes and achievements are a result of the collaborative work put in the collaborative efforts of the people and driving forces involved, that is, the conglomerate parties who signed the Memorandum of Understanding. Besides mentioning the aims, goals, and vision of the project, the contents should make a necessary mention of the delegation of work among the parties and the timeline assigned to each. This maintains an official record.

∙ In case of any discrepancies or disagreements later or while the project is going on, a disclaimer should be written with consent on behalf of all parties, to associate only with freewill, do their part with honesty and transparency, and adhere to any guidelines to avoid the hoax of a problem that causes the plans of the project to go awry.

Uses and Advantages of a Memorandum of Understanding

Due to the multiplicity of memorandums of understanding signed, by organisations and enterprises, in different sectors of governmental and private firms that adhere to the laws of the land to remain relevant wherever they are to be pursued, practised, and executed.

In the private sector, the memorandum of understanding states the requirements, agenda, goals, and vision of the undertaken project are discussed as an official testimony to the mutually agreed pact the companies, institutions, or individuals have entered with each other. It also regards the risks, responsibilities and financial investments, and delegation of work as well as the reaped profits as agreed upon by the participating companies. It majorly accounts for and denotes a private capital and profit encashed from the project.

While the governmental agreement of signing a memorandum of understanding (between the government/ state and one or more parties). This also includes the content as mentioned above and clauses. However, this might be in the interest of the government and private companies in the agreement.

The memorandum of understanding has its share of advantages for those involved in terms of ease of accessibility to work, efficient transmission and exchange of information, and the target audience for the results achieved due to the conglomeration of the group project.

∙ The responsibilities, risk handling, and financial investments are irrefutably explained and indisputably intimated in the contents.

∙ Better than a verbal commitment but less time-taking and hassle-free than legal proceedings involved for the same.

∙ Ensures adherence to the international law that all memorandums of understanding fall under

∙ It acts as both a testimony/ proof in case something needs to be looked at again or a reference for work/ fund delegation purposes.

Conclusion

Thus, a Memorandum of Understanding covers the most vital aspect of the partnership- communication. The transparency involved in the execution and pursuit of the business ventures that the concerning companies are seeking to achieve necessitates the very lever that, when turned, pushes the project to completion. Thus, keeping personal and the coalition’s interests in mind, a memorandum of understanding, is quite the deal when drafting and keeping a record of progress and developments made on the way. With Vakilsearch, you can make an MoU in the most hassle-free manner. Get in touch with our experts today to know more about the process involved. 

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