How many times you go through the terms and conditions mentioned in a legally binding contract? A lot of times, right?
Why does this happen?
This happens because you fear the legal repercussions of a faulty contract. You want to ensure you are agreeing upon the right terms. This is where a memorandum of contracts is needed.
A memorandum of contract defines the cooperative relationship between two or more parties wishing to work together or collaborate. It gives them the chance to review the terms and conditions before signing the final contract.
In simple terms, it is more formal than a verbal agreement but less formal than a contract.
What is the definition of a memorandum of contracts?
A memorandum of contract is a formal document that precedes the final contract between two or more parties.
Its primary objective is to outline the terms and conditions of the binding agreement before it is drawn.
Other commonly used terms for memorandum of contracts
A memorandum of contract is also known as a ‘memorandum of agreement’ or a MOA, and a ‘memorandum of understanding’ or a MOU. The usage of terms changes as per the context. These terms are used interchangeably but they convey the same meaning.
How is a memorandum of contract different from a contract?
A formal contract is a legal document that states the terms of an agreement between two or more parties. The agreement involves the exchange of value (money, goods, services, real estate, etc.). Whereas a memorandum of contract is a less formal document that precedes the main contract and aims to inform all the parties with the required information before they sign the contract.
|Read more –|
1. Essential elements that make a valid contract
2. What is a valid contract? Know its elements and benefits
See how these documents differ from each other in terms of various factors-
|Factor||Contract||Memorandum of contract or MOA or MOU|
|Enforceability ||A contract is enforceable in the court of law. It is signed when all the parties wish to create a legally enforceable agreement.||A memorandum of contract may or may not be enforceable. It can be presented in the court during a breach of contract, but under certain conditions.|
|Legality||A contract is always a legally binding document. All the obligations in a contract are mutually agreed upon. Any involved party can file a lawsuit if certain obligations of the contract are not met by the other party.||A memorandum of contract is not intended to be a legally binding agreement. It is mostly a non-binding agreement. But, it is always suggested to seek legal advice in such cases.|
|Intention ||The intent of the party in a contract is clearly established. The language proves that the parties knowingly entered into a legally binding agreement.||A memorandum of contract, MOU, or MOA may or may not be a legally binding agreement. It must be drafted carefully with the right choice of words to clearly express everyone’s desires. A failure in doing so can lead to unwanted consequences and legal disputes.|
Why would you need a memorandum of contract?
Everything in this world is done with a purpose. Likewise, a memorandum of contract, too, has the following purposes:
- The most basic purpose of this document is to inform the parties about the terms of the agreement. Such a document is not legally binding and can come with a disclaimer mentioning – ‘for informational purposes only.’
- All the parties involved in any agreement need to know and remember the terms they have agreed on. A memorandum of contracts helps such parties to keep a track of all such crucial information before preparing the final contract.
- It is used to indicate good faith between parties in the form of written documents. This is because it sets clear and mutual expectations and establishes clarity.
Advantages of a memorandum of contract
Here are a few benefits of having a memorandum of contracts before jumping to the final legal agreement-
- Drafting a memorandum of contract is quick as it contains brief information.
- Circulating a memorandum is an easy way to communicate important information with internal and external team members before drafting the binding contract.
- It is less legally binding than a contract and is not an enforceable agreement when drafted mindfully.
- It helps all the involved parties to maintain a written record. They can use this at the time of preparing the final contract as a reference, for legal reasons, or simply for better overall management.
Useful tips to draft the perfect memorandum
Memorandum in most cases is used as a tool to communicate an important message. It clearly states the required information without any exaggeration.
Clear writing denotes clear thinking. The following tested tips will help you bring clarity and productivity to your memorandum of contracts.
- Use a specific subject line to attract attention quickly
- Include clear and concise paragraphs as a memorandum needs to be short
- Be formal. Avoid using slangs and casual language in the content
- Use bullet points to emphasize
- Format the document smartly with bold headings, correct spacing and, uniform font size to give the memorandum a professional look
- Do not forget to proofread the document before sending it to anybody
Benefits of using Revv to draft your memorandum
Revv is an efficient document builder designed to help businesses with crucial trustworthy documents. Here are some benefits of creating your documents in Revv-
- Rich template library: Revv offers a wide variety of ready-to-use vetted document templates. These templates give a professional look and feel to all your important business documents.
- Document builder: The editor lets you edit the templates as per your preference and requirements. You just need to drag and drop elements of your choice in your selected templates.
- Internal & external review: You can easily collaborate with internal and external team members or clients to receive valuable feedback through notes and comments. You can also tag them with the @mention feature.
- Soft sign: The send for acceptance feature of Revv lets you send documents for initial approvals or intra organization approvals.
- Activity tracking: Revv lets you enjoy the perks of real-time activity tracking of the users of your document (who opened it, signed it, etc.).
- eSign: You can send documents for eSign by filling in the signer details within seconds.
- Email alerts: Revv sends notifications through emails when the status of a document changes. For example, when a document gets signed.
- App integrations: You can integrate various business applications, like, Google Drive, Google Sheets, Zoho CRM, etc. using Zapier.
- Instant online payments: You can leverage the benefits of instant online payments through Stripe integration within Revv.
- Organized storage: You can store different files in different folders. This helps to locate files easily for reference.
- Workflows: You can create automated approval workflows for documents like contracts, MOA, MOU, partnership agreements, etc.
It is always better to receive consent of all the contracting parties regarding the terms and conditions of any business relationship. This will eliminate the ugly legal disputes from troubling your peaceful days and nights.
Safeguard your professional and personal spaces by clearly outlining the details of any agreement before the final legally binding enforceable contract is drawn.