A memorandum of agreement serves two functions. It acts as a de facto contract between two parties, outlining what each will do, and what each will receive as a result of this agreement. It also can serve as formal documentation of an agreement when a contract is not possible or necessary.
Memoranda of Agreement
A memorandum of agreement, also called a memorandum of understanding or a letter of intent, is often created between parties who cannot have or should not need a contract.
For example, when competing presidential teams determine the parameters of a pre-election debate, they often draw up a memorandum of agreement to document their terms. Since the campaigns are unlikely to sue one another for a breach of the agreement and there is no financial consideration involved, a contract would not be inappropriate.
Businesses and or government agencies also use memoranda of agreement. They may work as documentation of formal agreements between managers of different government agencies as well. One again, there is no financial consideration and legal enforcement of the agreement is not contemplated.
Sometimes, however, a memorandum of agreement can be considered to be a contract. A contract does not have to be labeled as a contract in order to be enforceable. People may elect to call their contracts a memorandum of agreement, just as they decide to call them formal agreements or contracts.
When an MOA Is a Contract
All contracts and agreements should be reviewed by a lawyer. In general, four elements are required to make a contract: consideration in the form of payment or some other benefit must be exchanged between parties; legally enforceable actions from both parties must be documented within the agreement; the acts contemplated must be legal; and both parties must be free from any duress or threat.
In addition, the agreement must be free from anything that would prevent the contract from being found enforceable. Fraud, not of age, mental incapacity are examples of elements that make almost any contract unenforceable.
Memoranda of Agreement Could Be Treaties
The aviation and shipping laws that govern international skies and waters are actually memoranda of agreement. These agreements can be registered in the United Nation's treaty database at untreaty.un.org.
Memoranda of Agreement Suggestions
Before drafting a memorandum of agreement, a plain language document is drawn up that fully identifies the parties, outlines what each will do and what each will receive in return, and when and how either party may terminate the agreement. All parties that engage in a memoranda of agreement should have the position, resources, skills and contacts required to do as they are agreeing to do.