Also known as ‘heads of terms’ or ‘letters of intent’, an MoU is a document that outlines the expectations and responsibilities of two or more parties, creating a mutual benefit.
Often put in place for selective schools to form partnerships with state schools, memorandums of understanding can be used for a wide range of purposes. A typical MoU may include a commitment to explore the potential for:
- developing joint research projects and activities;
- collaborating on new and existing academic programmes;
- staff and student exchanges;
- doctoral student training and development; or
- any other activities that can potentially be viewed as mutually beneficial.
Are MoUs legally binding?
MoUs are not intended to be legally binding in their entirety. The commercial terms included in an MoU are usually a general indication of the parties’ intentions and form the basis for negotiating a formal contract.
However, MoUs often contain specific provisions that are intended to be legally binding, particularly those relating to confidentiality and exclusivity.
When drafting an MoU, if you intend the parties to be legally bound by a provision, you should ensure that the provision is clearly identified as such within the document.
The benefits of an MoU
There are several benefits for an educational institution agreeing to an MoU. These include:
- transparency for all parties about their contributions to the relationship, what each is getting out of it and the related timescales;
- the chance for governing bodies to review and approve the related project at an early stage, making it easier to get governor backing upfront to safeguard against changes in personnel at a later stage; and
- having a public document that clearly lays out what the partnership involves so that the governors, parents and other school community stakeholders can easily see how the school is contributing to the partnership and the benefits of doing so.
What to include in an MoU
Although there is no ‘one-size-fits-all’ memorandum of understanding, some common provisions include:
- Confidentiality: This provision is generally intended to be legally binding, as most parties want to ensure that any negotiations they enter into regarding a project (including the nature and scope of it) remain confidential. When drafting a confidentiality provision, careful consideration should be given to the time period that is specified, within which the parties must comply with their obligations (this should be dependent on the sensitivity of the information).
- Restrictions: These are often included to prevent the parties from doing something or acting in a specific way. A typical restriction would be for non-solicitation of business to prevent losing key employees to the other party. Although the parties are free to agree whatever restrictions they wish, the starting point is that they need to be reasonable to be enforced and they must protect a legitimate business interest.
- Principles of collaboration: You should agree to adopt a number of principles when carrying out the project; for example, collaborating and co-operating, being open, acting in a timely manner and adhering to statutory requirements.
- Project governance: This provides an agreed structure for the development and delivery of the project, including how the activities of each party are monitored.
- Intellectual property: It is important to record the intention of each party around the ownership of any intellectual property rights that are created in the course of the project so that it is clear which party owns what rights. A licence should then be granted to the other party so that they can use the intellectual property for the purpose of the project.
- Governing law: You should choose an appropriate governing law and jurisdiction clause to apply to the agreement. Generally speaking, if all parties to the memorandum of understanding are based in England, and the project will also be undertaken in England, it would be sensible to choose English law as the governing law.
Key takeaway
To reiterate, MoUs are not intended to be legally binding and should not be used as a substitute for a legally binding contract.
Memorandums of understanding are not designed to include much detail and are intended to record the commercial aspects of an agreement as opposed to any legal matters. An MoU should serve as a tool to help with drafting a contract and, if you intend for the parties to be bound it, you should ensure that it’s as detailed and carefully drafted as a formal contract.
