#Legal Sense

Memorandum of understanding

Funmilayo Olagunju

Memorandum of Understanding (frequently abbreviated as MOU) is also known as letter of intent in some jurisdictions. Consequently, Black’s Law dictionary gives a single definition for both memorandum of understanding and letter of intent.

Letter of intent is a written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement; a noncommital writing preliminary to a contract.

Memorandum of understanding is not a binding contractual agreement between the parties. Both natural person (human being) and juristic (Corporation, government agency, non-governmental organisation, or international organization with legal capable to sue and be sued in Court.)

The vital components of memorandum of understanding includes a clear description of the parties, the scope of the subject matter, the obligation of both parties, the duration of the MOU, date and signature.

A person who intends to create a legal obligation that is enforceable in Court should engage the service of a Legal practitioner to draft or review (as applicable) a standard agreement.

Memorandum of understanding is more of a gentle man’s agreement rather than a legal agreement. A party who signed a MOU can still bargain with third party as there’s yet an enforceable contract.

In exceptional cases, the Court may rule that a commitment identified under a memorandum of understanding has been made but it does not equate to enforcement.

In the case of ORAKA v ORAKA (2019) LPELR-47675 (CA), the Court held: “Memorandum of Understanding is not a contract or an agreement … but rather an intention to enter into a contract later. It has no binding force of a contract. It is to fix in memory what the parties want to achieve in the future contract”

Memorandum of understanding is not a proof of an existing contract. It is not safe to presume that a Memorandum of Understanding no matter how extensive is a substitute for contract. A final contract should not be waived.

“Now in earlier times in Israel, for the redemption and transfer of property to become final, one party took off his sandal and gave it to the other. This was the method of legalizing transactions in Israel”

Ruth 4:7 (NIV).

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