Memorandum of Understanding

Documents called Memoranda of Understanding, Letters of Intent, or Heads of Agreement are all instruments which are used to signify an intention to negotiate a contract in the future. Memoranda of understanding are useful documents to "kick- start' an agreement. They help lessen any discomfort that parties may feel where basic parameters are not written down before a proper agreement is drafted. An MOU can also help to make the arrangement clearer to the parties so as to speed up the process of negotiation in relation to the agreement.

An MOU is not intended to be a legally binding document. If you want a legally binding document then an MOU is not appropriate.

It is an unacceptable practice to sign an MOU that you have no intention of implementing. To misrepresent the intentions of the University by signing specious memoranda of understanding will erode the University's credibility in the market- place and make future negotiations more difficult.

Pressure to sign an MOU at the end of a meeting "because it is accepted practice in XXX country" should be resisted if no clear understanding has been reached.

If there is a cultural need to sign a document then one device is to use a "Record of Discussion" or "Record of Meeting". Such a "record" might state that "both parties will work towards the development of an MOU". If circumstances dictate that an MOU needs to be signed then it is essential that every attempt to avoid misleading or inaccurate statements.

If difficulties arise with an MOU, they will arise from the drafting. It is important to include a specific clause which negates any intention to create a binding relationship. A suitable disclaimer would be:

"This document is a Memorandum of Understanding and is not intended to create binding or legal obligations on either party. "

It is very important that nothing in the drafting of the document suggests that the parties are entering into contractual obligations, for if this is the case, any reference to the arrangements as being only "intentions" will be disregarded. It is also wise to avoid details and write in generalities.

Some examples of terms which should not appear are:

  • an ability to vary the contents of the MOU;
  • a term of the MOU;
  • a commencement date;
  • a termination date

All of these terms imply that the MOU is actually an agreement.

It is wise to make sure the contents of the document are correct. If the transaction founders and the Court interprets the MOU as a binding document then the harm will be much less if the content is correct.

An MOU may only be signed by the Vice-Chancellor, the Deputy Vice-Chancellors or a Pro Vice-Chancellor.

For an example, click here for an MOU template