What is a Memorandum of Agreement (MOA)?
A Memorandum of Agreement (MOA) simply describes the arrangement (or partnership) between two entities that wish to work together on a project or to mutually achieve a stated goal: in other words, it is an agreement but not yet a legally binding contract. An MOA specifies and outlines the nature of the proposed working relationship and essentially creates a ‘conditional agreement’ which usually anticipates an exchange of funds for services. Basically, an MOA functions as a legal document that details the terms and particulars of the partnership agreement but is considered less binding than a contract and much more informal than an agreement.
It is often the first step in a collaborative arrangement, either in the form of a service partnership or an agreement for technical assistance and training. It works as a tool because there is often an exchange of funds in the agreement, but the ‘partnership’ arrangement has not yet been formally legalised. Moreover, there is no restriction as to the amount of monetary exchange, as it is often the case that the arrangement itself presupposes a conditional ‘exchange of funds for services’ regardless of the amount.
Detailed Components of a Memorandum of Agreement:
Every MOA contains core components to eliminate ambiguity and ensure the parties communicate clearly. Here’s what they typically include:
Title: A clear title that identifies the nature of the MOA.
Authority: Who has the legal authority to enter into the agreement?
Purpose of the Agreement: This section should include:
Names of the parties involved.
A brief description of the scope of work.
Financial obligations of each party, if applicable.
Effective dates of the agreement.
Critical contacts for each party involved.
Detailed Description of Roles and Responsibilities: Outlining what each party is expected to contribute.
Payment Schedule: If applicable, how will payments be handled?
Duration of the Agreement: Specifies how long the agreement is valid.
Modification or Termination: Conditions under which the agreement can be altered or dissolved.
Signatures of Party Principals: Legal signatures from all involved parties.
Legal Standing of a Memorandum of Agreement:
Is an MOA legally enforceable? Yes. An MOA is a legally enforceable contract in which the parties agree upon the rights and obligations of each, therein are defined the objectives of the collaboration, and acceptable levels of risk are assigned. It is the cornerstone of any business relationship.
Memorandum of Understanding (MOU) vs. Memorandum of Agreement:
MOUs are similar to an MOA, however, in that they typically define a ‘general area of understanding’ with the caveat that ‘[o]ne or both the signing agencies or institutions retain their authority over the object or goal of the memorandum.’ Unlike an MOA, MOUs rarely provide for funding to transfer from one party to another to provide or perform the services in question; MOUs are typically contracted in the case of simple, straightforward agreements over the promulgation of common goals and causes (i.e., supporting the goals of a racial-equity organization, a scientific research conference, a think-tank on global warming, etc.).
This instrument is simple and non-binding, and while it may be helpful for stating mutual goals and designating the operation of some program, almost always included in an MOU is specific language that asserts programs receiving its regional or national approval have the stipulation that ‘neither party hereto shall be presumed to have assumed or incurred any liability or obligation of any kind whatsoever merely because of its signature.’
Conclusion:
A better understanding and respect for the differences between MOAs and MOUs, and recognising how and when they should actually be used, can help give maritime industry professionals the skills they need to make sure all the organisations with which they work are established and maintained so as to promote co-operation between them.
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