Memorandums of Agreement (MOA) vs. Understanding (MOU) By Dan Harkey
Dan Harkey
Educator and Private Money Real Estate Lending Consultant | 30,000 + connections
Contracts are specific agreements, usually in writing, executed by two or more parties that outline terms and conditions.? Those are enforceable in court (or should be if the judge operated from the rule of law, which is rare)(too often in a court, the judge is ideologically driven or tends to be swayed by the side with the best lying skills.) Judges regularly interpret contracts differently, showing subjectivity and deviating from the operation of law.
Contracts require six elements:
·????? Offer and acceptance.
·????? consideration, as in something of value.
·????? legal intent-must be for a legal purpose.
·????? Capacity- must be of age or mentally capable of understanding.
·????? Intention- the parties must intend to enter into a legally binding contract.
·????? Awareness- the parties must intend “a meeting of the minds” or mutuality.
Contracts may be verbal; only the enforceability and actual agreements are challenging to quantify.
For instance, an MOA could be used when two parties agree to develop a property together, while an MOU could be used when a buyer and seller agree on the general terms of a sale before a formal contract is drafted.
The document may be drafted according to the signatories' intent and willingness to proceed with a formal contract. An example is a real estate purchaser’s desire to buy under specific pricing, terms, and conditions, subject to moving to the next step of a formal purchase agreement. The document will represent a starting point for negotiations to purchase the property.
Memorandum of agreement (MOA)
An MOA is a legally binding and enforceable contract describing a business relationship between parties to complete a mutual project. The agreement carries all the elements of a binding contract, creating rights, obligations, duties, and legally enforceable remedies for non-compliance. The MOA contains the agreed terms and outlines the steps to reach the desired goals.
The MOA will include:
·????? Names of the parties involved.
·????? Scope of work or tasks to be completed.
·????? Financial obligations, if any.
·????? Dates of agreement and projected terms to accomplish.
·????? Key contacts.
·????? Define the roles and responsibilities of the parties.
·????? Length of the agreement
·????? Modification and termination
·????? Signatures of the parties.
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Memorandum of Understanding (MOU)
An MOU is an agreement between parties that offers a flexible approach to outlining plans for mutual benefit and an action plan. This flexibility can be reassuring, allowing adjustments and modifications as the situation evolves and instilling confidence in the parties involved.
Under U.S. law, an MOU is like a letter of interest or intent. It spells out the plans but does not bind anyone. A private money lender may issue a letter of interest or intent to make a loan, subject to the approval of the credit file and completion of the underwriting process of a fully documented loan file.
Advantages and disadvantages of an MOA
The advantage is that the MOA functions as an enforceable binding contract. Wiggle room, memory lapses, intentional lying, and deception are limited to a finite condition.
Advantages and disadvantages of an MOU
The advantage of an MOU is that the document allows all parties to clearly state their mutual goals and objectives. The completed document results in less uncertainty and prevents unexpected disputes in the future. This clarity can make all parties feel informed and confident about the agreement's direction. A well-drafted MOU is significantly less expensive than drafting a sophisticated contract designed to be executed by all parties.
The disadvantage of an MOU is that the document is intended to be something other than a binding contract.? Either party can walk away or modify the expectations, leading to a lack of commitment and potential disputes. Similarly, changing or terminating an MOA can have legal and financial implications, as it may require the consent of all parties and could result in the loss of certain rights or obligations.
It's always best to consult your lawyer for a more in-depth understanding of the benefits or to draft an agreement. This step can give you the necessary legal guidance and ensure that your agreements are sound and enforceable. ?
Thank you
Dan Harkey
Educator @ Private Money Lending Consultant
949 533 8315 [email protected]
Visit www.danharkey.com
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