A memorandum of agreement, or MOA, is a legal document describing a business partnership between two parties that have agreed to cooperate to meet an agreed objective or complete a project. The memorandum lays out the agreed terms and outlines the steps to reach the desired goal of the agreement.
MOAs are usually used when money is involved, but that is not always the case.
It is considered a legal document because of its signatures. Still, it is less formal than a contract and more formal than a verbal agreement. In business it can be used for:
A memorandum of agreement is not the same thing as a memorandum of understanding (MOU). An MOU is used to describe each party's point of view about a project before entering into it.
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Even though it is less than a formal contract, there are certain sections you want to make sure are included when completing an MOA. Some of these sections include:
Below are 5 Steps to follow when completing an MOA:
Overall, you want the agreement to be understood by everyone involved, so use simple and easy-to-understand language. You should also try and compose it with positive language, describing what a party will do, not what they won’t. Finally, ensure a balance of expectations among the parties involved, so no one party shoulders more of the responsibilities.
Sometimes it’s easier to use the parties’ own words to draft an agreement of this nature. It needs to be specific but straightforward enough to answer the who, what, when, and how questions.
Here’s an article about creating an MOA.
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There are a few differences between a Memorandum of Agreement with a Memorandum of Understanding (MOA) that are worth noting.
Difference #1:
Difference #2:
Difference #3:
A memorandum of agreement (MOA) is a legally binding and enforceable type of contract. When two parties enter into an MOA, the MOA is a formal understanding of what is expected between the parties. It includes agreed objectives and assigns risk.
In the case of a memorandum of understanding, the MOU serves to formalize a goal between two parties without making it legally binding. An MOU is similar to a handshake, where the integrity of both parties is the only binding force involved.
The MOU is usually a good first step to a legal agreement, but in and of itself is not legally binding. However, there are cases in which a clause within the MOU renders it legally binding.
Look for these key elements in an MOU; they make it legally binding.
Memorandums of agreement are regularly used in business and even treaty negotiations.
In business, they can be used for situations such as:
Additionally, governments make use of MOAs to establish treaties between countries. These agreements require review in the United Nations Treaty Collection to determine whether they can be legally binding and avoid “secret diplomacy.” However, many of these forms of MOAs are made, and continue to be held, in confidence. The draw, for the government, of the MOA over other formal options is that they can be made without legislative approval, which makes the process much simpler to create.
When considering any potentially binding agreement, like a memorandum of agreement, you should enlist the help of a trained lawyer. An experienced lawyer can review and ensure you fully understand the implications of what you are signing before you sign.
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