Problems When Using an MOU without Legal Advice

by | Aug 19, 2023 | Business, Contracts, Featured, Law

Using an Memorandum of Understanding (MOU) without proper legal advice can lead to various problems. Here are two examples:


A. Ambiguity and Misunderstandings:


Let’s say two companies are collaborating on a joint project and decide to draft an MOU to outline their partnership. Without seeking legal advice, they draft a basic MOU that lacks specificity and clear language. As a result:


1. Ambiguity: The terms and expectations of each party’s contributions to the project are vaguely worded. This leads to misunderstandings about who is responsible for what and what level of commitment is expected from each party.


2. Unclear Deadlines: The MOU doesn’t define project timelines or deadlines for milestones. This creates confusion about when certain tasks should be completed, potentially causing delays and missed opportunities.


3. Scope: The parties didn’t define the scope of the project comprehensively. As a result, one party starts introducing new aspects to the project that the other party wasn’t aware of or didn’t agree to, leading to disputes about the project’s original intent.


4. Disputes: Due to the lack of clarity, disputes arise about the interpretation of the MOU. Each party has its own understanding of what was agreed upon, leading to potential legal conflicts that could halt the project altogether.


B. Lack of Enforceability:


Imagine a situation where an individual wants to collaborate with an artist to create a mural for a public event. They draft an MOU outlining the artist’s responsibilities, compensation, and the timeline. However, without legal advice, they fail to properly structure the MOU:


1. Legally Binding Language: The MOU lacks the necessary legal language to indicate that it is a binding agreement. Without this, the artist could argue that they weren’t obligated to complete the mural as agreed upon.


2. Consideration: The MOU doesn’t clearly outline what the individual is providing in exchange for the artist’s work (consideration). This can lead to the argument that the agreement lacks a crucial element of a contract.


3. Signature and Witness: The MOU isn’t signed by both parties or witnessed properly. This could render the document unenforceable in court since the basic formalities of a contract haven’t been met.


4. Legal Rights: The individual may find it difficult to enforce the terms of the MOU if the artist decides not to follow through. Without proper legal advice, they might not have included clauses to protect their rights or seek remedies in case of breach.


In both of these examples, the absence of proper legal advice when using an MOU can lead to misunderstandings, disputes, and situations where the document may not hold up in a legal context, ultimately causing frustration and potential financial losses for the parties involved.

NIK ERMAN NIK ROSELI Commercial Lawyer

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