Memorandum of Understanding

Memorandum of Understanding and the Treaties of the European Union

Description of Memorandum of Understanding provided by the European Union Commission: A memorandum of understanding is an international instrument of a less formal kind. It often sets out operational arrangements under a framework international agreement. It is also used for the regulation of technical or detailed matters. It is typically in the form of a single instrument and does not require ratification. They are entered into either by States or International Organizations. The United Nations usually concludes memoranda of understanding with Member States in order to organize its peacekeeping operations or to arrange UN Conferences. The United Nations also concludes memoranda of understanding on cooperation with other international organizations.

Memorandum of Understanding (MOU) in International Trade

Meaning of Memorandum of Understanding (MOU), according to the Dictionary of International Trade (Global Negotiator): An informal record, document or instrument that serves as the basis if a future contract. A Memorandum of Understanding between companies is a document like a contract but not binding on the parties, except when confidentiality and non-competition agreements are included. It is essentially a collection of key points of an agreement between two parties that are negotiating a contract; in this respect a Memorandum of Understanding is simply the agreement signed prior to the final contract. Memorandums of Understanding are also known for its acronym MOU. Main purposes of a Memorandum of Understanding for in international trade transactions are:

The statement that the parties are currently negotiating.

Clarifying the key points of an operation for the convenience of the parties.

Assess the interest of the other party to carry out the business.

Collect the advances that occur in each of the negotiations.

Provides guarantees if the deal collapses during negotiation.

Another characteristic of the Memorandum of Understanding is that can resemble a written contract but usually not binding on the parties in their entirety. However, the majority of these agreements, contain provisions that are binding, such as non-disclosure and non-compete agreements. The two Memorandums of Understanding more used in international transactions are the Memorandum of Understanding for International Distribution and the Memorandum of Understanding for Joint Venture.