For an MOU, what is particularly important is the intention of the parties at the time of signing the MOU. A contract will be binding if there is offer, acceptance, intention to be legally bound and consideration. Whether an MOU is binding is a question of general contract law. However, it is common practice for an MOU to be part binding and part non-binding on the parties. This is a decision that will change from project to project. However, the terms that are commonly found in an MOU would include:Īgreement of parties to negotiate in good faithĪgreement to use best or reasonable endeavours to undertake contractual obligationsĬonfidentiality (if not already provided for in a confidentiality agreement)Īt the time of drawing up the MOU, it is important for the parties to decide whether they wish to be bound by the terms of the MOU or not. There are no fixed or usual terms contained in an MOU. It may also distract focus from negotiation of a concluded arrangement. However, entering into an MOU prematurely may limit flexibility in future negotiations. This Article looks at the typical content of an MOU and the practical and legal implications which arise as a result of entering into an MOU.Īn MOU can be very useful in giving commercial (and perhaps legal) certainty or a framework to negotiations and enabling a process to begin (eg raising financing and obtaining approvals). This preliminary agreement is commonly referred to as a memorandum of understanding or MOU for short. At the outset of a project, parties often record the basic terms under which they agree to work together for the particular project.
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