{"id":9085,"date":"2020-02-22T09:00:35","date_gmt":"2020-02-22T03:30:35","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=9085"},"modified":"2020-06-16T13:56:35","modified_gmt":"2020-06-16T08:26:35","slug":"a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/","title":{"rendered":"A Comprehensive Guide to Draft a Memorandum of Understanding Agreement"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Memorandum of Understanding is a formal document that outlines the expectations of two parties before sealing a deal. It is a non-commitment agreement that defines the intensions of businesses to work together in consensus. The Memorandum of Understanding Agreement highlights the rights &amp; obligations of two corporate parties that are about to enter into a Deed. Being an efficient tool to determine the targets\/objectives, MOU frames a course of action to achieve the same. If you also want to draft MOU for your business, then this write-up will be highly beneficial for you.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a308088e02c1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a308088e02c1\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#Key_Features_of_MOU\" title=\"Key Features of MOU\">Key Features of MOU<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#What_is_the_importance_of_Memorandum_of_Understanding_Agreement\" title=\"What is the importance of Memorandum of Understanding Agreement?\">What is the importance of Memorandum of Understanding Agreement?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#Comparison_between_Letter_of_Intent_and_MOU\" title=\"Comparison between Letter of Intent and MOU\">Comparison between Letter of Intent and MOU<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#Steps_to_draft_Memorandum_of_Understanding\" title=\" Steps to draft Memorandum of Understanding\"> Steps to draft Memorandum of Understanding<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#Things_to_consider_while_drafting_the_Agreement_of_MOU\" title=\"Things to consider while drafting the Agreement of MOU&nbsp;\">Things to consider while drafting the Agreement of MOU&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/a-comprehensive-guide-to-draft-a-memorandum-of-understanding-agreement\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Features_of_MOU\"><\/span>Key Features of MOU<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><div class=\"shadow6\">MOU streamlines the operations of collaboration or partnership by pre-establishing the essential clauses. \u00a0Let\u2019s take a look at the primary characteristics of a <strong><a href=\"https:\/\/swaritadvisors.com\/memorandum-of-understanding\">Memorandum of Understanding<\/a><\/strong> Agreement which clearly defines its functions:<\/div><\/p>\n\n\n\n<ul><li>MOU is a document that describes the mutual expectations of both the parties involved in a negotiation.<\/li><li>It must formulate the name, purpose &amp; other details of the parties&nbsp;who agree to sign the Memorandum.<\/li><li>The Agreement should also specify the meetings plan that shall be scheduled after closing the deal.<\/li><li>MOU must depict the individual&nbsp;capital contribution&nbsp;to be made by each party.<\/li><li>To avoid any disagreements later, it is better to mention the person\u2019s name in the MOU who will have authority to take major financial decisions.<\/li><li>A Memorandum of Understanding document prescribes those individuals who will be responsible to handle day to day Company\u2019s operations. Thus, it states the roles and remuneration of the concerned person.<\/li><li>MOU creates the need for maintaining the&nbsp;financial records of the prospective assignment\/program.<\/li><li>Once both the parties agree upon the conditions of the MOU, it should be signed and dated by the authorized representatives of each party.<\/li><li>The Memorandum must mention a valid duration of such an Agreement&nbsp;among the parties. Hence it should include the beginning and ending dates of MOU applicability. Moreover, it should notify about the&nbsp;circumstance under which the Memorandum will get&nbsp;terminated.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_importance_of_Memorandum_of_Understanding_Agreement\"><\/span>What is the importance of Memorandum of Understanding Agreement?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>MOU plays a vital role in the formation of a Company. Here are some of the advantages of preparing a Memorandum:<\/strong><\/p>\n\n\n\n<ul><li>MOU creates a medium to generate funds for the Company as it gives a clear idea to the investors about the financial position, aims and future plans of the Company.<\/li><li>It is indispensable to submit MOU Agreement during the incorporation of the Company since it specifies the conditions on which the Company is built.<\/li><li>A Memorandum of Understanding contract helps to regulate and direct the Company towards its original objective. It defines the limits of operations and confines the Company to not function outside the prescribed limits.<\/li><li>MOU further enables a Company to maintain a better relationship with its stakeholders by specifying the liabilities of each stakeholder.<\/li><li>The Memorandum provides comprehensive details of the Managers, Promoters and other important persons associated with the Company.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Comparison_between_Letter_of_Intent_and_MOU\"><\/span>Comparison between Letter of Intent and MOU<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The table given below denotes the common differences that LOI shares with MOU:<\/strong><\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n<p><strong>Basis of Difference<\/strong><\/p>\n<p><strong>&nbsp;<\/strong><\/p>\n<\/td><td>\n<p><strong>Letter of Intent<\/strong><\/p>\n<p><strong>(LOI)<\/strong><\/p>\n<\/td><td>\n<p><strong>Memorandum of Understanding (MOU)<\/strong><\/p>\n<\/td><\/tr><tr><td>\n<p>Nature of Parties<\/p>\n<\/td><td>\n<p>In LOI, only two parties are involved.<\/p>\n<\/td><td>\n<p>In MOU, two or more parties can be involved.<\/p>\n<\/td><\/tr><tr><td>\n<p>Uses<\/p>\n<\/td><td>\n<p>LOI is used to define the terms of an Agreement between the buyer and seller before finalizing the deal.<\/p>\n<\/td><td>\n<p>MOU specifies the parameters under which the parties shall work in a Joint Venture or Partnership.<\/p>\n<\/td><\/tr><tr><td>\n<p>Duration<\/p>\n<\/td><td>\n<p>The Letter of Intent often gets converted into a contract. Thus, it sustains for a limited period.<\/p>\n<\/td><td>\n<p>Memorandum of Understanding Agreement continues to stay in its original state until the completion of the prescribed task.<\/p>\n<\/td><\/tr><tr><td>\n<p>Signatories<\/p>\n<\/td><td>\n<p>LOI enlists the agreed terms and conditions among the parties, but it is only signed by the party that has forwarded the initial proposal.&nbsp;<\/p>\n<\/td><td>\n<p>The actions and conditions prescribed in MOU are signed by all the parties involved in the Agreement.<\/p>\n<\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Steps_to_draft_Memorandum_of_Understanding\"><\/span><br>Steps to draft Memorandum of Understanding<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"800\" height=\"2000\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/02\/draft-Memorandum-of-Understanding.png\" alt=\"draft Memorandum of Understanding\" class=\"wp-image-9096\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/02\/draft-Memorandum-of-Understanding.png 800w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/02\/draft-Memorandum-of-Understanding-120x300.png 120w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/02\/draft-Memorandum-of-Understanding-768x1920.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/02\/draft-Memorandum-of-Understanding-410x1024.png 410w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider_while_drafting_the_Agreement_of_MOU\"><\/span>Things to consider while drafting the Agreement of MOU&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>If you want to prepare a Memorandum of Understanding Agreement, incorporate the following aspects:<\/strong><\/p>\n\n\n\n<ul><li><strong>Specify the overall intent<\/strong>: An ideal MOU starts with a brief description of the overall intent that the parties strive to achieve. It should state those clauses which accurately reflect the party\u2019s purpose and ensures no ulterior motives.<\/li><li><strong>Roles and responsibility: <\/strong>There should be a separate section in MOU that describes the responsibilities and duties of the parties involved. It is prudent to define each party\u2019s role along with his shared responsibility, if any. Generally, this section of the MOU is the most lengthy and detailed part as it is the sole purpose of the Agreement.<\/li><li><strong>Time period: <\/strong>It is utmost essential to mention time duration with the starting and ending dates when the MOU will come into effect since it does not exist for eternity.<\/li><li><strong>Disclaimer:<\/strong> The Memorandum of Understanding must have at least one or more disclaimer indicating that all the activities undertaken must comply with both Federal and State laws.<\/li><li><strong>Financial arrangement: <\/strong>There should be a segment in MOU, wherein the financial implications of both the parties are defined in detail. It should include the name of the entity that will pay for the items and to whom.<\/li><li><strong>Risk Management:<\/strong> Mishaps are inevitable in business. Therefore, it is important to have a provisional clause that specifies who will pay for the losses.<\/li><li><strong>Signatures:<\/strong> If one or more parties involved in the MOU Agreement are Companies, then all the members, including CEO, Departmental Chair, Directors and executives need to sign on behalf of the Corporation.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><div class=\"shadow4\">Memorandum of Understanding is a potent strategic tool to smoothly layout the operations of a Joint Venture or Partnership. When the purpose, duties, financial records and other substantial elements are mutually agreed by the parties in MOU before entering into a contract, it leaves no scope for disputes later on.<br><br>If you need professional assistance in framing the MOU of your next business venture, then consult Swarit Adv<\/div><\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/complete-guide-to-winding-up-a-private-limited-company\/\" target=\"_blank\" rel=\"noopener noreferrer\">Complete guide to winding up a Private Limited Company<\/a><\/mark>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Memorandum of Understanding is a formal document that outlines the expectations of two parties before sealing a deal. It is a non-commitment agreement that defines the intensions of businesses to work together in consensus. The Memorandum of Understanding Agreement highlights the rights &amp; obligations of two corporate parties that are about to enter into a [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":9086,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[380],"tags":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9085"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=9085"}],"version-history":[{"count":14,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9085\/revisions"}],"predecessor-version":[{"id":11063,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9085\/revisions\/11063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/9086"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=9085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=9085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=9085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}