Before beginning collaboration with any organisation, it’s important to set out your terms to avoid confusion. The memorandum of understanding offers a flexible first step towards partnership, before a more formal legal agreement is drawn up. So, what is a memorandum of understanding? We’ll discuss the definition and outline how to write one below.
What is a memorandum of understanding (MoU)?
Often shortened to ‘MoUs’, memorandums of understanding are documents drawn up between two or more parties entering a partnership. These parties could include:
A memorandum of understanding is not a legally binding contract. It’s a preliminary agreement used to outline terms of the partnership before a formal, legally binding document is drawn up. Like a letter of intent or engagement letter, the MoU is typically used during first negotiations to make sure everyone’s on the same page. Once it’s been written and signed by both parties, the memorandum of understanding functions as a reference document as you move towards a formal contract.
When to use MoUs in Australia
There are several circumstances in which a memorandum template might be useful.
You want to share information with another party to work towards a common goal
Two government entities need to work together without a formal contract
Two corporate entities wish to work together on a single project without formal restrictions
While a verbal agreement doesn’t put obligations in writing, an MoU makes sure that all expectations are clearly defined before you work together on a new project. At the same time, parties can join forces without restrictive or overly formal boundaries.
If you’re in need of legally enforceable agreements, a MoU will not be suitable. It’s also not suited to any trade involving an exchange of money, as it wouldn’t offer a legal basis for payment.
How to write MoUs in Australia
Every memorandum of understanding template will be slightly different, but there are a few basic elements that you should include.
The organisations involved in the partnership
Beginning and ending dates of the agreement
Context or reasoning behind your agreement
Names and contact details of the key individuals involved
Expected outcomes of your partnership
General outline of what will happen
Any other relevant terms of your agreement
If you wish to make your MoU legally binding, you can include a written statement that it is the will of both parties to make these terms legally enforceable. However, a memorandum of understanding is not meant to serve this purpose. If you’re worried about accidentally writing a legally binding contract, it's best to avoid any uncertainty by clearly stating your intent.
No matter the structure you use, be sure to include space in your memorandum of understanding template for signatures. Both parties must sign and date the document to ensure agreement. While it’s not required, you can sign in front of a witness to make it more official.
Memorandum of understanding templates
If you’ve never drafted a MoU before, it’s helpful to use a memorandum template. You’ll find plenty of options online to download as well as standard templates in software like Microsoft Word. Legal apps contain a wide selection of templates, or you can check websites like Template Lab for dozens of free memorandum templates.
While all differ in structure, what MoUs all have in common is that they contain an outline of your partnership details, relevant terms of the agreement, and all responsibilities of each party. This ensures that there aren’t any misunderstandings as you work together, putting a solid foundation in place for more formal contracts.
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