How to Craft a Watertight MOU that Stands the Test of Time

Tragedy struck on April 15, 1912.  The world was shocked.

Titanic, the famous luxury steamship, which was widely touted as ‘unsinkable,’ actually sank in the North Atlantic coast, killing more than 15,000 people on board.

Experts claim that, from the start, Titanic was doomed.

Why?

The gigantic ship’s design, which was popularly praised as an awesome state-of-the-art marvel, spelled doom for the vessel. It had 15 watertight bulkhead compartments, complete with a double bottom. Each chamber had watertight electric doors, controlled by a switch.

But there was a problem.

The Titanic’s seemingly impregnable watertight design had a hidden flaw, allowing water to pour from one part to another. This proved to be fatal, ultimately causing the luxury ship to sink.

Anything we can learn here when it comes to crafting a memorandum of understanding?

Absolutely.

Beware of Illusions

Of immediate interest to us now is the endeavor to craft an enduring memorandum of understanding document.

Learn to craft a watertight MOU document that can stand the test of time.

Unlike the Titanic, make sure it is both watertight and safe.

Weed out the fatalistic gray areas that can lead to costly legal suits, comparable to the Titanic’s infamous disaster.

Yes, stay safe, always.

Learn to Use MOUs; They are Becoming the Trend

Memorandums of understanding are increasingly becoming popular instruments in modern domestic and international engagements.

Here are three reasons why:

MOUs are:

  • Inexpensive.
  • Easily kept confidential (unlike ordinary treaties).
  • Useful in modification of existing treaties.

Well-crafted MOUs usually come with varying lengths and degrees of complexity. This notwithstanding, most MOUs commonly share a number of things.

For instance, all MOUs typically represent the range of expectations agreed on by the parties in a deal. Moreover, all MOUs are neither legally binding, nor do they require funding.

Initial Steps to Write an MOU

Before commencing the work, make sure you understand clearly what a memorandum of understanding is.

Decide whether an MOU will best suit your needs.

Make it clear to your partner whether you want specific parts of the MOU document to be binding.

This done, you are ready to write the MOU.

Get it Right: Making a Successful MOU is No Walk in the Park

Creating a successful memorandum of understanding is no walk in the park. Indeed, it can be quite complicated. Things could get even murkier if you have little idea of the vital ingredients to include in the document.

For these reasons, if you are given the responsibility to create this important document, it means you have an extra assignment; you urgently need to learn about the best methods you can use to craft an excellent MOU.

To accomplish this, some prefer to take the easier route: They opt to use a ready-made or downloadable template. Using this, they simply add their own terms and conditions.

The beauty of knowing the vital ingredients of making a unique MOU template is that you will get to master the document, tailoring it to your particular needs.

To Draft the Best MOU, Identify the Common Uses of the Document

Organizations and individuals often use memorandums of understanding in several situations.

These may include:

  • Drafting a payment schedule in situations where a contract fails to specify one.
  • Explaining intentions:

Some organizations use MOUs to elaborate and clarify their purpose and intentions as they relate to a contract.

  • Outlining transaction conditions:

Some companies use MOUs to act as an addendum to a legal contract. These include the sale of property or prenuptial agreement contracts.

  • Some types of MOUs are used to seal business or personal deals. An example of this is the information memorandum. The information memorandum usually serves to explain a raft of data held by certain parties. Such information generally relates to situations or projects of interest to the parties.

Note: The “information memorandum” is referred to as a memorandum.

Consider Whether the Time is Right to Make an MOU

The following are the situations when it is best to enter into an MOU:

  • When you wish to manage obligations, achieve a common objective, and share information with the other party.
  • When the special knowledge of all parties is needed to achieve a certain outcome, but the parties are unwilling to be bound by terms of a contract.
  • When a formal contractual agreement is expressly prohibited between governmental entities and organizations.

Consider Whether the MOU is Unsuitable:

If you prefer a legally enforceable document, avoid a memorandum of understanding, go for a contract.

If you wish to regulate the exchange of money or legally deal with financial matters most efficiently, an MOU is not well suited.

Note that, depending on the relevant factors, some parts of an MOU can always be crafted in such a manner as to be legally binding.

Regardless, for any section of the MOU to be legally enforceable, it must be clearly stated in the document that this is the express will and intention of the signing parties.

Beware: A Poorly Crafted MOU May Be Powerless

A memorandum of understanding cannot be binding if:

  • it contains a statement saying that there was no intention by the parties to engage in any kind of legally-binding relations.
  • The MOU clearly states that a legal contract would be concluded later.
  • The terms of the document’s operation are unclear. It might be concluded that this is the case where there is evidence of a clear need for further negotiations. Moreover, this is also true where the roles of the parties in the agreement are demonstrably ambiguous.
  • The MOU is not signed by all the parties.

Take Your Time to Craft an Enduring MOU Document

A memorandum of understanding is powerful. It must be accorded due respect. Of course, crafting a document of this nature takes time, effort, and some resources.

Yes, take your time. Do not be in a hurry.

Craft a truly enduring document that will serve its purpose. The fruits will ultimately be sweet. The rewards of sealing a warm understanding between peoples are often long-lasting.

Prepare the Ground to Make a Perfect MOU

Before making a workable memorandum of understanding document, the parties in the agreement need to do a few things to ensure all goes well.

First, the parties must determine the essential aspects of the planned agreement.

Moreover, each party should begin the process at the ‘planning phase.’ This is the stage where everyone identifies what they expect from the agreement.

Further, the parties should outline what they are offering in the proposed agreement and the elements that are free for negotiation.

Having formed the initial draft, the parties should now be prepared to meet the other side. This kick-starts the journey.

When the representatives meet, they can now discuss the deeper details of the MOU.

The Perfect Guide to writing an Excellent MOU

It is essential to use the best guide when writing an MOU. Such a guide will give the final document a suitable structure and clarity of communication.

Moreover, it gives the document enough flexibility to suit the requirements of a unique agreement.

Ensure that the structure of the planned MOU is well organized. If this is done, the will of the parties will be clearly represented. Further, the details of the agreement will be effectively communicated.

Most important, such a guide will help you avoid the pitfalls of unintentionally wording the MOU in such a manner that the MOU accidentally becomes legally-binding.

Essential Details to Include in an Excellent MOU Document

In general, ensure that the following features are clearly explained in the memorandum of understanding:

  • The organizations involved.
  • The due date of the agreement.
  • The purpose and context of the agreement.
  • The principles and values of the agreement.
  • The key people in the agreement.
  • The expected outcomes.
  • The general terms, including everyone’s roles.
  • The terms of agreement.

Important Elements to Cover in the MOU

  • The proposed agreement’s consideration.
  • Both parties’ obligations.
  • Details/ description of the proposed agreement.
  • Other persons/businesses with access to information about the company.
  • Optional: Clauses for exclusivity/ confidentiality/ non-solicitation and/or obligations for exclusivity.

The Process of Drafting an Excellent MOU

The Ideal process should be as follows:

  1. Planning phase: Each of the parties in the agreement should determine what they want as well as what they are ready to negotiate on.
  2. Drafting phase: The parties in the agreement proceed to make a draft of the initial MOU.
  3. Negotiating phase: The MOU outlines the guidelines governing the mediation process.
  4. Timelines negotiation: After the completion of negotiations, the parties now establish a time frame for the MOU to take effect, expire, as well as the rules pertaining to its termination.
  5. Restrictions: Each party finally adds any restrictions, privacy statements, and disclaimers before signing the final MOU.

Language

As earlier noted, the language used in drafting a memorandum of understanding is primarily the determining factor in deciding whether the document may be legally binding in a court of law.

If the language carries too much legal value, the MOU can acquire the status of a legally enforceable contract even though this was never intended.

When drafting your MOU, make sure to filter out any legalistic language that may be unduly interpreted by other parties.

You can always use a legally verified template to draft the MOU. This is, indeed, one of the best ways to control the potency of your MOU.

You can either create your own MOU, following a model sample or use a freely-available template. In case you take this option, ensure to use the services of the most reputable, verified websites.

Beware the Legal Consequences for Breaching the NDA or Privacy Agreement

You will discover that many MOUs usually contain some legally binding clauses. These may include privacy or non-disclosure agreements. Such clauses can be enforced.

Take precaution when crafting your MOU document: You could face legal action if you breach specific clauses.

Note: It is essential to know that the existence of a legally enforceable clause in the document does not imply that the entire document is legally enforceable.

Other Tips to Craft the Perfect MOU Document

Regardless of its nature, a well-crafted memorandum of understanding is typically a result of proper planning, careful thought, and a fair dose of ingenuity.

While drafting your MOU, it is crucial to ensure that the chosen template is perfectly harmonious with the items of agreement formulated by both parties. Authorized agents of both parties must, of course, sign the final document to make it official and operational.

Before starting the process of drafting your MOU, you first need to select a suitable template or sample to use. Consider the options below:

 Choose a Suitable MOU Template

Here are some standard templates of memorandums of understanding that you may freely choose from, depending on the nature of the planned agreement:

MOU:

  • Between a company and a university.
  • Between a group and an individual.
  • Between two individuals.
  • Between two business parties.
  • For the Army.
  • For companies.
  • For businesses.
  • For employees.

Master the Essential Elements of an MOU

Learning to craft an excellent memorandum of understanding is a valuable skill. No doubt, doing this can help prevent misunderstanding, confusion, and potential disputes. You need to master the essential components that make up an MOU.

Once you master the nitty-gritty of drafting the best MOU, other benefits will come. For one, the core responsibilities and general expectations of all parties will become evident. This is true because a good MOU usually lays out such elements in a straightforward manner.

Craft an MOU that Can Test the Waters

One crucial piece of information to include in a good memorandum of understanding are the details relating to the parties in the agreement.

It is prudent to indicate the types of insurance relevant to such parties. Include details like commitment levels, promises, and liability insurance.

Help Users to Recognize the Red Flags

In case you are considering creating a contract with someone, it is wise to make a memorandum of understanding first. If you discern that the other party is slow to detail things in writing, this is a definite red flag about their commitment levels.

Yes, this is your cue to halt engagements with such a potentially untrustworthy partner. You have recognized the red flag and acted.

Although MOU templates are basically different, they have some common threads which feature prominently in the making of the document. It is, therefore, essential to include such elements in every MOU template.

Consider the following:

Financial Plans

In case there are financial arrangements, it is essential to include these. State clearly the part of the agreement that each party will have to pay for. Do not forget to specify the due dates, as well as the persons tasked with receiving such payments.

Responsibilities

The duties and responsibilities of the parties in the deal must be factored into the memorandum of understanding. Ensure that such information is clear and well detailed. This helps to forestall confusion.

It also works to minimize the risk of future misunderstandings or miscommunication. In case the responsibility factor plays a vital role in the agreement, such details are particularly necessary.

Time Frame

It is essential to specify the time frame assigned to the agreement clearly. Mostly, a good MOU should feature crucial elements like the starting date and end date. This is what makes the document valid.

Do not forget to include shared responsibilities in the MOU template. Indeed, such information is the primary reason why the MOU is drafted. The shared responsibility section usually constitutes the longest part of an MOU template.

Intent

This is a most crucial part of an MOU document. Any well-written MOU template should start with a rough outline of the overall intent. To be sure, the MOU must reflect the goals and objectives of all parties in this agreement.

As noted, whenever we talk about MOUs, there should never be lurking gray areas. If this happens, the document will become ineffective.

Parties

A good MOU template must include the names of the parties making up the agreement. These could be groups, companies, individuals, organizations, and similar entities.

Disclaimers

In case there are disclaimers in the agreement, make sure you include these.  Before listing, make a separate section specifically for the disclaimers.

It is wise to clearly state what the deal is not meant to cover or achieve. Moreover, it is essential to include what the completion of such an agreement does not guarantee.

Once you do this, you are sure that future misunderstandings and potential conflicts over the MOU are minimized.

Sharing Risks

One of the most crucial segments in a memorandum of understanding is the risk-sharing section. It usually carries information pertaining to the person or persons to take responsibility in the event things don’t go as planned. Ensure to include this section.

It is quite essential to include such details. In the unfortunate event that a well-meaning MOU accidentally causes loss of profit, injuries, damages, or death, the details on risk-sharing will help.

It is good to confirm that the parties who are named as being responsible for damages are actually ready and willing. If you find it inappropriate to identify specific people, think of a compromise to take care for the risk-sharing element.

Signing

Although memorandums of understanding have no legal force, they remain significant.  If you are tasked with making an MOU template, it is practical to include some space for the representatives of the parties to affix signatures.

Immediately after signing, each of the parties in the agreement should be given a copy of the document. These copies should be carefully kept in the records.

The MOU is now drafted, fine-tuned, signed, and ready.  You may think that you now have a watertight MOU template. But, no. There is still much work to do.

Consult a Qualified Lawyer

Hire the services of a qualified lawyer. The lawyer will peruse the document, give the green light, and make the memorandum of understanding formal and active.

After this, the parties can safely proceed with the implementation of the terms of the document.

If you want to come up with the best MOU, ensure that the document is clear and well-written. Keep in mind that the MOU should ensure that the parties engaging in the agreement are not compelled to sacrifice more than they are willing.

Craft a Well-Written MOU Rivalling a Contract

Yes, this is what makes a good memorandum of understanding balanced and reasonable. Interestingly, the courts of law may, at times, conclude that a specific MOU enjoys equal status with a legal contract.

The reasons for such a verdict is often premised on the fact that the document is clear and well-written. The element of clarity surely enhances the value of this document to both the courts and the parties.

An interesting definition of a memorandum of understanding is that it can properly be described as ‘an agreement to agree.’ Yes, MOUs are generally designed to outline the essence of agreements.

Make a Dignified MOU Document

A memorandum of understanding usually brings together the ideas and expectations of parties. The importance of such a document is that it acts as a bridge to connect the parties into a possible contract.

Interestingly, certain states in the US do consider a memorandum of understanding as a legally binding contract. This is the case in situations where both parties have satisfactorily signed the agreement.

This gives sufficient proof that, even though an MOU is non-binding in the legal sense, an increasing number of people now consider MOUs as official agreements.

At worst, MOUs are usually considered as non-binding agreements that can precede a legal contract. Keep this in mind when drafting an MOU document.

Legal Factors to Take into Account When Drafting the MOU

It is essential to know what makes an MOU legally binding.

A legally binding MOU should include the following elements:

  • Identification: all the parties in the deal are listed using their address, legal name, and business where applicable.
  • Acceptance: It should ensure that all the parties have signed the MOU.
  • The MOU document must clearly identify itself as being an MOU, as opposed to a contract.
  • Intention: the MOU must identify the purpose and objectives of the agreement. The document should have separate sections for the goals and intentions of the participating parties.
  • Consideration: There are details of the financial obligations of the persons tasked with monitoring the finances, and the methods to be used.

Once each of these sections is in place, and if the language used in the MOU clearly explains the terms of the agreement, backed by consideration, then this document may be treated as a contract and thus may be legally binding.

An Excellent MOU Factors in the Legal Implications

To craft an excellent memorandum of understanding that stands the test of time, make sure that the conceived template contains the essential articles on the mutual agreement.

Remember that the signing parties usually consider the MOU to be expressly binding even though the document has no direct legal claims.

Keep in mind that a legal document must contain the following items:

  • Names of the parties making up the agreement.
  • The terms and conditions.
  • Objectives and subject matter.
  • The signatures of responsible representatives.

As noted, the MOU is the clearest sign indicating that a legal contract might soon follow. Still, the MOU itself cannot be said to a legally defensible document.

While keeping this in mind, the drafter of the MOU still needs to outline the points constituting a typical legal document.

This is what makes a valid MOU document.

Avoid Using Meaningless Legal Terms

The best template of a memorandum of understanding should have a clear explanation, describing precisely what the agreement implies. This should be straightforward.

The template must explain the scope of the agreement. This means it should clearly state its limits and limitations.

Further, an MOU template should outline the responsibilities and duties of all the signing parties. Most importantly, the document should be concise and unencumbered in needless legalistic jargon.

Take Caution: Avoid Giving the MOU Too Much Legal Force

Note that you must be careful while crafting your memorandum of understanding.

Unless you take precautions, you may find that you accidentally let the document become binding due to indiscretion with the wording or tone.

Yes, some instances would make an MOU legally binding when the parties never intended this to happen.

This is why you should learn the art and mechanics of crafting the best MOU template that works to seal a mutual agreement while also preserving your interests.

What to Do to Avoid Making the MOU Legally Binding

Often, a memorandum of understanding might be granted unintended legal force if the terms used in the document have excessive legal value. The effect is that the MOU would, unwittingly, become legally enforceable.

Note also that the said legal value usually results from the actual terms used in the MOU rather than the type of agreement signed.

If you want to avoid making an accidental, legally binding MOU, you should insert a statement like this in your document:

“This memorandum is not a legally enforceable contract made by the aforementioned parties.”

In case you prefer to craft a legally binding MOU, make sure to use clear and specific language.

Remember: The best way to create a cost-efficient MOU is to use a template.

How to Determine whether Your MOU Has Too Much Legal Value

The memorandum of understanding may have been written in a manner that packs in excessive, unintended legal value in the following situations: If:

  • It includes a parallel verbal agreement. In such a case, while the MOU itself may not be expressly binding, the terms used in the MOU document may also be found in a parallel agreement. This might make the MOU binding.
  • It includes specific provisions on privacy and confidentiality. Such provisions may be expressly stated as legally binding or otherwise intended. The effect may make the MOU legally enforceable regardless of the original, non-binding nature of the document as a whole.
  • It includes too much detail pertaining to matters like service delivery, payment, organizational roles, or the due processes in case of a breach of the agreement.
  • It excludes a specific statement making it clear that the parties never intended to initiate legally-binding relations by creating this MOU.

Discern the Difference Between an MOU and a Business Treaty

It is clear that a Memorandum of Understanding is not merely a simple document that every Tom, Dick, and Harry can design and use. Instead, an MOU is a reasonably complicated document that ranks between an informal agreement and a legal contract.

To craft a great MOU template, you must discern the differences that set MOUs apart from ordinary business treaties. Once you master this, you’ll be better equipped to make the best MOU samples that seal successful mutual agreements.

Conclusion

Memorandums of Understanding are quickly becoming the vogue in sealing both individual and corporate agreements. While making an MOU, it is wise to include as much information as possible. Doing this will insulate you against future issues and make the MOU document better.

Make sure to include all relevant details to make the purpose and intent of the agreement clear. You should include elements like the time frame for the MOU, the scope of the agreement, and the liabilities.

Once you do this, your MOU template will acquire genuine and substantial value. In turn, this makes the document long-lasting. Remember that the more ambiguous the MOU is, the less value it holds. Indeed, a memorandum of understanding, while not legally binding in the manner of a contract, is still way better than a verbal agreement.

In this ultimate guide, we have endeavored to travel the extra mile in the effort to divulge the secrets relevant in writing an excellent MOU that makes everyone proud.

We have also tried to make clear the legal value of a typical MOU, how this document differs from a legal contract, and exactly how to use it.

 

Shawn