Buying property, investing in a company or concluding a partnership a memorandum of understanding (MOU) is a document that is usually taken for granted and a lot of information entailed in those pages are generally disregarded. Yet, being the most important document signed between the parties prior to any concrete contractual document. Hence, Top Lawyers in UAE have highlighted 5 notable points which shall be considered prior to sign a memorandum of understanding as below:

  1. Commercial Arrangements

It is apparent from the general practice that MOU is drafted to put forth the commercial arrangements agreed between the parties on a piece of paper. However, we advise our clients to carefully scrutinize the legal aspects of the commercial arrangements prior to signing the MOU. It is pertinent for the parties to give attention to the legal clauses provided, if any and raise concerns to comprehend the very intention of the clause and clarify the issues before making any commitment.

2. Re-Review your rights and obligations

Why we say re-review as obviously, we want you to be assured of your rights and obligations under the MOU and to understand if you will be able to fulfill your commitment or contractual obligation. Most importantly, you must very carefully peruse your obligations and commitments that can be used against you and on off chance can land you in difficult situations.

3. Reasonable Investment

In several cases where parties are tight on the budget and resources, the MOU can essentially assist the parties and is comparatively a cheap investment. Generally, MOU is drafted to include the initial offer, rights and obligations of parties, opportunity to conduct due diligence, financial obligations and termination of the arrangement. In a nutshell, the MOU has all necessary clauses which are sufficient to frame contractual obligations.

4. Termination of MOU

Agreements are not perpetual as they have a limited time period or should involve clauses for early release of contractual obligations. Thus, to ensure a smooth exit from the MOU, you must ensure that the MOU allows you to terminate the arrangement should there be a default or delay from the other party. Importantly, either party shall comprehend their situation based on the MOU and reasons which may lead to termination of the contract and put forth such clauses upon mutual consent.

5. Appoint a legal consultant / Lawyers in UAE

Legal terminology is not easy to understand and may have different meanings in different circumstances. Therefore, signing the MOU without really understanding the legal jargon would invite unwanted legal repercussions. In such cases, it is inevitable to appoint a legal consultant who can review the very of the MOU and can prevent you from entering into an unfavourable agreement.