What? Some may ask.
You plan to sign a Memorandum of understanding for a business deal?
This is crazy!
Why, an MOU is not a legally-binding document.
You could be walking into a trap!
To such people, a business deal must ooze an aura of business.
Yes, it must be businesslike, in every sense.
At face value, an MOU does not seem to have such credentials.
Or so it goes.
Do we have good reasons to believe that an MOU is a credible document that can work well for a business deal?
Yes, we do.
Here are 7 reasons why an MOU is quite a good seal for a regular business deal.
A Business MOU Can Be the Perfect Bulwark for a Lasting Partnership
Some business organizations have to deal with projects that will be implemented over time. At times, such projects take years to complete.
Moreover, such projects are usually complicated and time-consuming since the owners have to dedicate a lot of resources to make them tick.
The idea of signing a formal contract in these circumstances may not be best.
This is precisely where a business memorandum of understanding comes in.
Indeed, this type of MOU can be time-saving and efficient.
Those who have much business experience have found these types of agreements to be realistic and practical. One advantage of such MOUs is that they serve as a perfect skeletal structure of a possible contract in the future.
The MOU helps to set out the details of the engagement in advance.
This simplifies the overall process.
In such situations, a business MOU also works well as the bulwark of a successful business partnership. It helps to keep the signing parties on toes regarding their duties and obligations.
With this type of agreement, no one can shun their duty with regards to the agreement. Instead, everyone must fulfill their obligations to the letter.
A business MOU makes the intentions and objectives of the parties clear. In case of a possible future disagreement over the deal, the MOU acts as an authoritative reference point.
It is a stark reminder that the parties had agreed on specific terms and conditions.
Keep in mind that when the stakes are high, it is not wise to take chances.
Signing a detailed business MOU is the perfect guarantee to seal a secure, binding business deal.
Mega Businesses Will Sign an Actionable, Confidential MOU in a Flash
In practice, a typical memorandum of understanding is usually a formal agreement that binds two parties.
Many companies and corporate organizations commonly use MOUs to initiate official partnerships.
Although most MOUs are not legally binding, such agreements generally carry an aura of honor that transcends the ordinary gentlemen’s agreement.
Indeed, MOUs are often the first step in guiding the various parties towards a legal contract.
Notably, MOUs are prevalent in most multinational relations since they take a shorter time to ratify. Moreover, compared to a contract, it is easier to keep the terms of an MOU confidential.
Many contracts are usually a public affair characterized by noisy fanfare and drama.
This is probably why MOUs are increasingly being used to modify international treaties.
Further, MOUs generally outline the mutually-acceptable expectations of people, governments, and organizations.
As noted, MOUs are preferred in international relations because they can be formulated relatively quickly and quietly.
Corporate Entities Effectively Use MOUs to Record Bipartisan Agreements
Some governments, notably that of the US, prefer to use memorandums of understanding in state government departments and agencies. This is especially the case when major contracts are still in their planning stages.
Most businesses and corporate agencies usually choose to sign MOUs since it is a friendlier and more bipartisan symbol of a working relationship compared to a formal contract.
When most modern organizations wish to record agreements between them, an MOU is usually an automatic instrument. This is because MOUs are widely considered to be less binding than a pure contractual engagement.
MOUs Offer Irrefutable Proof of a Binding Business Deal
It is common for parties to agree quickly on specific points in the course of a business negotiation. Typically, this is what forms the basis of a possible future contract.
At times, everything goes on well for a while, before one of the partners reneges on the terms of the deal.
In this case, a memorandum of understanding is the perfect elixir.
Although the document is not detailed, an MOU is usually packed with enough information to record the crucial features of the agreement. This means that, regardless of the passage of time, none of the parties can later turn back on the deal and expect to go scot-free.
There are clear consequences stipulated in every agreement.
An MOU is no exception.
Moreover, an MOU is a strong record of all the details of the agreement. In this sense, an MOU is a guarantee that the parties will honor the deal in its entirety.
Yes, an MOU provides the irrefutable proof of a done deal.
A Well-Crafted Business MOU is as Good as a Contract
Many businesses use memorandums of understanding as a powerful asset to bind successful commercial engagements. Indeed, an MOU can be most beneficial as a catalyst for clear communication.
In different ways, an MOU guarantees successful business relations. To make an effective agreement between parties, the partners need to be well-versed with the goals and objectives that bring them together.
This might seem simple and straightforward. Nevertheless, when the stakes are high, and the negotiations turn explosive, the situation can be tricky.
At such times, it is usually essential to clarify the terms of a business deal. This helps to cool down matters and reduce the possibility of disagreements. Moreover, the parties must outline their expectations regarding the proposed agreement.
The partners can solve such riddles by signing a well-structured and detailed business MOU.
Once this is done, it means that the parties are now settled on a common intention. This is important since the terms of the deal which are detailed in the agreement can act as an authoritative reference point going forward.
In fact, if the MOU is well-detailed and crafted with the objectives of the parties in mind, the partners may not need to sign a contract in the future.
In this case, the business MOU is sufficient to serve the interests of the parties both now and in the future.
Indeed, such a business MOU is as robust as a regular formal contract signed between business partners.
MOUs Can Powerfully Safeguard the Interests of Businesses
Can anything be more unsettling than a heated argument flaring up during a lucrative business negotiation?
Yes, all seasoned negotiators will tell you that this can be a tricky situation.
It can be especially unsettling when, before this, everything seemed to be moving on well. Indeed, this can be worse if the deal seemed to be just minutes away from being concluded.
Most of the time, though, business negotiations can get heated when the parties are at the initial stage of the engagement. This is the point at which most parties usually part ways over the terms of a proposed deal or contract.
Many potential partners have found memorandums of understanding to be the perfect instrument for dealing with such situations.
This is because the general nature of MOUs makes them a powerful safeguard for business relations. MOUs can actually clarify the expectations of the parties. Moreover, they can thrash out the details of the objectives of the parties.
When the parties have to haggle over the terms of the agreement for a long time, a business MOU can come in handy. Right at the drafting stage of the proposed agreement, such an MOU can make it clear that the parties have agreed on specific points of the deal.
In this way, no party is left in limbo since everything is well spelt out.
An MOU Offers the Perfect Exit Strategy
There are times when a prospective partner in a planned business deal has second thoughts about the setup of a budding relationship.
A partner may initially be upbeat about the merits of the deal.
Regardless, at some point, it seems like the idea of signing a formal contract at this juncture is a risky business.
What could pull such a partner out of this quagmire?
Yes, you guessed right.
The parties can start with a memorandum of understanding.
The partners should make sure that the current agreement clearly stipulates that any of them can exit the deal whenever certain expectations are not met.
In this way, an MOU saves the day as a document that works in the initial stages before the parties are ready to engage in a more binding agreement.
A memorandum of understanding can be a perfect seal for a pure business deal.
Just like most agreements, an MOU is a form of contract. Like other contracts, an MOU can be legally binding in the fullest sense of the term.
Yes, the parties that participate in signing an MOU can be made fully liable for the implementation of the terms of the deal.
Anyone deemed to be acting in breach of a formally signed MOU can suffer adverse consequences in the corridors of justice.
Indeed, a well-crafted MOU can be just as robust as a formal contract, in both letter and spirit.
In the final analysis, an MOU can be effectively used to seal a business deal that benefits all the parties.