Memorandum of Understanding

“Heads of terms “ is the alternative name for the memorandum of understanding (“MOU”). It is commonly used to record the basic principles of an agreement briefly and succinctly. In most mediations, the primary goal of the mediator is to enable the participants to come to an agreement which can be recorded in a memorandum of understanding, signed and dated at the conclusion of the mediation meeting.

Because the mediator is not in a position to act for either party, the MOU will not contain the detail usually associated with a comprehensive commercial agreement. He will advise the parties to instruct their respective solicitors to expand the MOU into such a document. In simple cases, the parties may make their own further agreement as to the detail. Alternatively, a further disagreement arises, they could return to the mediator.

Your mediator will remind you that this agreement is binding, provided it is signed and dated. It does not need to be in “legal” language.

If two parties sign and date an agreement which is sufficiently complete to be given effect by the Court then the Court will uphold it. Do not assume it is non-binding.

Get it signed

If the parties are not represented at the mediation by their solicitors, then it is up to the mediator to draw in the strands of agreement, see it dated and signed and subsequently send a copy to each party.

The role of the mediator in this is purely administrative. He has no obligation to make assumptions as to what one or both parties might wish to add or by adding “usual” legal provisions, though he may do so with the approval of both parties.

Refining your deal

If the parties leave the mediation meeting without a signed and dated document, then there is always time for one of them to decide to try to improve the agreed terms. This happens most commonly when the parties go away to their respective solicitors and instruct them to draw up the final version.

If the MOU is signed and dated, it is still up to you to decide whether or not you wish to instruct solicitors to suggest improvements. Solicitors will make comments and suggest improvements, because that is what you pay them to do. You should try to avoid a situation where you or your conflict party wants to change one of the points now agreed and signed.

If the MOU was signed and dated then it is binding. If you or your conflict party then has second thoughts and decides to change something in the agreement then that is often the beginning of a disappointing return to the start of your negotiations.

If the deal is comparatively straightforward, the parties may well decide they don’t need solicitors. They have agreed what needs doing and they just get on with it.

In some cases, the parties may actually prefer a provisional agreement, as the MoU provides, confident that they can take it further or apply it to additional circumstances or for some other reason. The mediator is fine with that too.

Another alternative outcome is that the mediation proceeding runs out of time before the final terms can be agreed. One possibility is to adjourn the meeting to a future date. Another is for the parties to get together and come to a final deal, with the benefit of the discussion before the mediator.

In summary, our mediator will always try to promote a binding agreement.

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