It should also mention the person authorized to make the major financial decisions.Ħ. The memorandum should specify the amount of capital contribution to be made by the parties.ĥ. the parties can decide to meet at least once in a quarter.Ĥ. It should specify the plan for the meetings between the parties. It should clearly specify the purpose and the goals for which the memorandum is being signed.ģ. It should specify the name & other details of the parties between whom memorandum of understanding is being signed.Ģ. Features of MOU:Ī Memorandum of Understanding should have the following features:ġ. It does not constitute a legally enforceable obligation but, this non-legally binding MOU may be useful to serve as an agreement between two or more departments within a single public entity. MOU’s can be kept confidential by the parties, if desired. It is used to gauge the intention of the transacting parties before a deal is officially signed between them and doesn't grant either of them any rights. It is made when two or more parties outlining the rights and obligations of the parties to the agreement are into initial discussions. A Memorandum of Understanding or MOU Agreement is entered into when parties have agreed to enter into a contract, but the formalities (such as terms and conditions) of the contract are yet to be negotiated. Memorandum of understanding (MoU), also known as Letter of Intent in India, is just a means for two parties to reach a decision. The memorandum of agreement only contains the important legal language that creates the “constructive notice” effect and makes the waiver of partition rights more effective.What is MOU? What is Memorandum of Understanding? Note that the memorandum of agreement does not describe what the parties have agreed to their agreement is private, and should not appear in the public records. Also, there must be a signed agreement that is separate from the memorandum of agreement. If the memorandum of agreement is not recorded in the county records, it will be useless. A properly prepared and recorded memorandum of agreement prevents this disastrous result in most cases.įor the memorandum of agreement to function, Notarized, and recorded in the public records of the county where the property is located. In general, under Federal law, the trustee is not bound by the agreement, meaning the trustee could force a sale of the property and take half of the proceeds without paying back the down payment loan. Later, the owner who paid less down payment goes bankrupt, and his share of the property is taken over by a bankruptcy trustee. The co-owners have an agreement stating that the owner who paid less of the down payment will repay the other owner when the property is sold. To illustrate a fairly common disaster that the memorandum of agreement is intended to prevent, imagine a situation where two people agree to equally share a property, but owner pays 80% of the down payment. Second, it prevents a creditor, bankruptcy trustee, or other non-signing owner from using a legal process called partition that forces a sale of the property followed by a division of the money according to title percentage (without regard to what the agreement says). First, it provides “constructive notice” of the existence of the agreement so that creditors or others who become owners through a court proceeding or lien process cannot claim that they are not bound by the agreement because they did not sign it. The memorandum of agreement functions in two ways. The memorandum of agreement protects an owner who is not bankrupt or in debt from creditors, bankruptcies and liens involving the other owner. The most common problem of this type is when a creditor seeks to collect from one of the owners, and the most dangerous situation is where there is a bankruptcy or tax lien. Recording the memorandum of agreement protects the parties against certain kinds of actions by people that did not sign the agreement but have some claim against the property or against one of the owners. Sample Memorandum of Agreement A memorandum of agreement is designed to be used along with a real estate co-ownership agreement to provide additional protection for the parties.
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