คลังคำศัพท์

Memorandum of Understanding (MoU)

Moderate

A Memorandum of Understanding (MoU) is defined as a written agreement between two or more parties, which is legally-non binding.

What Is a Memorandum of Understanding (MoU)?

What Is a Memorandum of Understanding (MoU)?

It is a written agreement that all the participating parties have a mutual understanding of the matter and agree with one another. It is regarded as the initiating terms of a formal contract. It is widely used in business transactions and personal matters concerning finance and law-related communications.

How Does a Memorandum of Understanding Work?

An MoU is an announcement that all the parties in a contract are in unison about moving forward with a contract or venture. It is written with a declaration that the project will be taken to completion in the foreseeable future. 

It is considered synonymous with the letter of intent and the Memorandum of Agreement (MOA). MoUs are frequently signed confidentially between various international governments, state institutions of a country, and business organizations. 
A well-crafted MoU provides a framework that aligns the efforts of all the parties involved in a common direction. This ensures that the intended goal is attained efficiently. It outlines the important principles and instructions that can help bring various parties on the same page. Division of labor between the negotiating parties is simplified before a contract can be signed. This allows the parties to assess the compatibility and efficiency of the plan, without any legal intervention.
Many experts refer to an MoU as an ‘‘agreement before an agreement’’. Each party can communicate the objectives and expectations beforehand. Misinterpretation, queries, and doubts can be addressed in a timely manner.

Important Things to Notice in a Memorandum of Understanding

Every MoU should have clear instructions lined up with a mutual understanding of the parties. It should include details that can be used in the future contract. 

The foremost thing to notice is the reason and goal of the MoU. It should be consensually decided after elaborate discussions. The agreement of all participants is mandatory. 

The date and time of the commencement of the agreement must be exact. If possible, the period of the project and the agreement should be mentioned blatantly so that each party knows there is a time limit. 

Details of each party and negotiator, together with their agreed-upon roles should be noted while signing an MoU. Any clash of ideas and roles is addressed timely so that the discord doesn’t creep into the actual contract. 

If there are rules and repercussions of backing out from the contract, they should be duly noted and agreed upon by everyone. If anyone goes back on the predetermined terms, the project can suffer huge losses that should be foreseen and discussed. Preferably, the MoU should clearly state if there is space for any of the parties to back out at any given time. 

Benefits of Memorandum of Understanding

  1. An MoU is beyond any legal intervention. The lack of binding and inability to be used in the court makes it an ideal preliminary agreement for any project.
  2. Future contracts and agreements are more streamlined and lead to less hassle with a predetermined MoU in hand. Interparty conflicts are avoided.
  3. MoU is drafted efficiently, giving parties more time to focus on the goal at hand.
  4. It is cheaper to sign an MoU as there is no need to hire a lawyer or a legal negotiator for formulating a mutual agreement. 

Currently, MoUs are the standard informal agreements signed between governments and various cryptocurrency platforms around the world. They have paved the way for designing frameworks for legalizing blockchain technology. The most recent MoU was signed between the government of Lesotho and Apollo to allow the application of blockchain technology to various government projects.