What is Memorandum of Understanding (MOU)?

A Memorandum of Understanding (MOU) is a legally-non binding written agreement in which all of the parties involved share a common knowledge of the situation and agree with one another. It’s considered to be the initiating terms of a formal contract and it is widely used in personal financial and law-related interactions, as well as corporate transactions.

How Does a Memorandum of Understanding (MOU) Work?

An MOU is a statement that all parties agree to proceed with a contract or endeavor. It is prepared with the expectation that the project will be completed in the near future. MOUs are often signed confidentially between international governments, country's state agencies, and corporate organizations. It’s considered to be the same thing as a Memorandum of Agreement (MOA) or a letter of intent.

An elaborate MOU provides a framework for coordinating the efforts of all parties involved and outlines the principles or instructions. This guarantees that the targeted aim is met efficiently. Before a contract can be executed, the division of labor between the negotiating parties is simplified. This enables the parties to evaluate the plan's suitability and effectiveness without the need for legal intervention.

An MOU is often referred to as "an agreement before an agreement". Prior to the meeting, each party can explain their goals and expectations. Any misinterpretations, questions, or doubts are handled quickly.

The Notable Things of a Memorandum of Understanding (MOU)

• The goal and the reason for an MOU should be consensually agreed on by all of the participating parties.
• Every MOU should have explicit instructions that are aligned with the parties' common understanding and include details that are important for the contract.
• The time and date of the agreement should be indicated as precisely as possible and met accordingly.
• While signing an MOU, the details of each negotiator and party, as well as their roles, should be indicated.
• Rules and repercussions of backing out from the contract (if there are any) should also be indicated in the agreement.

The Advantages of a Memorandum of Understanding (MOU)

• MOUs are drafted in no time, which allows all parties to concentrate on the task at hand.
• With a predetermined MOU in hand, future contracts and agreements are more streamlined and result in less bother, as well as help avoid conflicts between parties.
• Signing an MOU is less expensive since it eliminates the need to pay a lawyer or a legal negotiator to draft a mutual agreement.
• An MOU is beyond legal intervention, therefore, it's a perfect preliminary agreement for any project because it's legally non-binding and can't be used in court.

MOUs are widely used by governments and numerous cryptocurrency platforms all around the world. They've definitely cleared the way for the development of legal frameworks for blockchain technology.