Renewing a contract: what to consider
The important considerations that need to be made when renewing a contract.Read more
An MoU is a document that records the willingness of two or more parties to move forward with a legal contract.
Also known as ‘heads of terms’ or ‘letters of intent’, they are used for a wide range of purposes and are often put in place to assist with the negotiation of supply and distribution agreements and service contracts.
Memorandums of understanding 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 a memorandum of understanding, 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.
There are several benefits why you would agree to a memorandum of understanding for a commercial transaction. These include:
Although there’s no ‘one size fits all’ template for a memorandum of understanding, some common provisions found in one include:
To reiterate, memorandums of understanding are not intended to be legally binding and should not be used as a substitute for a legally binding contract.
MoUs 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.
If you require assistance with drafting or reviewing a memorandum of understanding, please contact us on 01332 226 130 or complete the form below.
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