Clearly, the Memorandum of Understanding is a formal agreement between two or more parties. It is often used in cases where parties do not want a legal commitment or in situations where the parties cannot create a legally enforceable agreement.
An MOU is a formal alternative to a gentlemen’s agreement. In the United Kingdom, an MoU is often called a concordat. When documented, an MOU ensures that expectations are clearly stated between the parties at an early stage. Clear expectations about the responsibilities of both parties are essential to successfully continue the relationship. It represents statements of intent, and the implied obligations that should reasonably be expected to be met under normal circumstances. It can have additional clauses added If the project changes substantially, a new MOU should be drawn up.
We’ll move on to clearly examine the requirements when drafting a Memorandum Of Understanding (MOU)
1. State the overall intent of the MOU: Many MOUs begin with a brief description of the overall intent of the parties. MOUs should have clearly stated clauses that accurately reflect what the parties are intending to do to ensure there are no ulterior motives, as they have no place in effective partnerships.
2. The Parties: The next clause in an MOU describes the parties to the agreement. These are the personalities or organizations that’ll be involved in the agreement, and is not restrictive to a certain number of persons/organizations as long as all parties agree on the overall intent of the MOU.3. The Period: In an MOU, it is important to specify a time period for the partnership with start and end dates. As MOU’s are not eternal and everlasting.
4. Assignments/Responsibilities: This important section of the MOU describes the duties and responsibilities of each party. It is generally more effective to describe each organization’s responsibilities separately, beginning with the items that are an organization’s sole responsibility. List each group’s sole responsibilities, followed by a description of shared responsibilities, if any. In many cases, this section of the agreement will be the most detailed and lengthy. Clarifying responsibilities is the number one purpose of a written agreement.
5. Disclaimers: While drafting, it is important that MOUs will contain one or more disclaimers, including one indicating that employees of Organization A are not to be considered employees, borrowed or otherwise, of Organization B and vice versa. It may also be worthwhile to disclaim what the partnership is not intended to do, guarantee, or create.
6. Financial Arrangements: Where financial implications are involved in the overall intent of an MOU, These should be spelled out in detail including which entity will pay for each item and when payment is due and to whom.
7. Risk Sharing: Another critical element of an MOU is a description of who will bear the risk of a mishap. What if something goes wrong? What if the partnership’s activities result in injury, death or a financial loss? An important tenet of risk management is that an organization should never assume responsibility for something over which it does not have control. A formal MOU may include a provisional clause, promising that Organization A will pay for losses suffered by or caused by Organization B. Ideally, indemnification provisions should be mutual in that each party will be responsible for its own negligent acts or omissions. In considering financial implications, make certain your partner is not only willing but also able to pay for losses it causes.
8. Signatures: A representative from each partner with authority to bind their organizations contractually should sign the MOU. Each partner should retain a copy of the signed agreement.
Realize that a MOU is a contract and, as such, should be reviewed by your attorney before you sign the document to make certain that your values are protected and that you aren’t giving away yourself in an effort to move forward with the partnership.
SOURCE: No Strings Attached, Untangling the Risks of Fundraising & Collaborations, $10.00