Memorandum of understanding

Definition

A Memorandum of understanding (MOU or MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It most often is used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforcement agreement. It is a more formal alternative to a gentlemen's agreement.

A Memorandum of Understanding or MOU is put in place to establish a clear understanding of how the deal will practically function and each party's role and compensation.

A MOU must (a) identify the contracting parties (b) spell out the subject matter of the agreement and its objectives (c) summarize the essential terms of the agreement, and (d) must be signed by the contracting parties.

In international public law, a memorandum of understanding is used frequently. It has many practical advantages when compared with treaties. When dealing with sensitive or private issues, a memorandum of understanding can be kept confidential, while a treaty cannot.

How MOU is Different from Agreement

MOU is like a contract, but it does not have to carry the same legal weight. If the wordings used in the MOU are vague and unclear and do not create any binding effect, then the same cannot be enforced. It does not create a valid contract. But if one party do anything on reliance of MOU and sustains any loss he can recover back losses but cannot get enforce the MOU. Both Parties of MOU are bind by estoppel and any of them cannot take adverse stand.

A memorandum of understanding is an agreement between two parties in the form of a legal document. It is not fully binding in the way that a contract is, but it is stronger and more formal than a traditional gentleman's agreement. Sometimes, a memorandum of understanding is used as a synonym for a letter of intent, particularly in private law. A letter of intent expresses an interest in performing a service or taking part in an activity, but does not legally obligate either party.

While, Agreement contains proposal and its acceptance and intention of parties is to bind each other with the terms of agreement. It is intention of parties that if any one violet the terms other will go to court and get it enforced.

Implementation of MoU in Transnational dealings

In international public law, a memorandum of understanding is used frequently. It has many practical advantages when compared with treaties. When dealing with sensitive or private issues, a memorandum of understanding can be kept confidential, while a treaty cannot. The other advantage of MoUs over more formal instruments is that, because obligations under international law may be avoided, they can be put into effect in most countries without requiring parliamentary approval.

A memorandum of understanding can also be put into effect in a timelier manner than a treaty, because it doesn't require ratification. In addition, a memorandum of understanding can be modified without lengthy negotiations. This is especially useful, except in multilateral situations. In fact, most transnational aviation agreements are a type of memorandum of understanding.

Example:

• The Memorandums of Understanding on Labour Cooperation between The People's Republic of China, Singapore and New Zealand on 2008, in parallel with their respective free trade agreements
• An international memorandum of understanding is the Oil for Food Program, which was created by the United Nations in 1995 and lasted until 2003. This agreement allowed Iraq to sell its oil to the world in exchange for humanitarian help, such as food and medicine for Iraqi civilians.
• The Memorandum of Understanding on Hijacking of Aircraft and Vessels and Other Offenses between the US and Cuba, meant to criminalize hijacking in both countries (February 3, 1973)
• The agreement between the government of Indonesia and the GAM in the Aceh peace process, 15 August, 2005.

“How to write a Memorandum of Understanding?”

Since each deal is vastly different, there is no particular convention of writing MoU. As said above the MOU can be a simple statement e mailed to the other party with a response saying they agree. In reality, you can make the Memorandum of Understanding as simple or complicated as is necessary for the Joint Venture and the comfort of those involved. Some want every detail and possibility ironed out ahead of time; others don't.