Let’s come to an understanding

Let us come to an understanding. It is nothing more than a sentence that individuals repeat in the event of a disagreement between two people over a specific matter. It is often an invitation to negotiate in one way or another, and from this simple concept, contracts are formed until they are culminated in their final form.

Since contracts, gentlemen, begin with the negotiation stage, where the offer is issued and received with conditional acceptance, so that the latter serves as a new offer. This is the case until the will of the parties is focused on common factors by mutual consent and agreement. Then the contract drafting stage begins, in which the desires of the parties are embodied in a way that does not contravene public order. If This done, the contract will enter into force.

Based on this process, most major companies always prefer memorandums of understanding before starting any deal. What is a memorandum of understanding and its legal nature?
The memorandum of understanding is the agreement of the parties to define the general frameworks for the negotiation phase, including the commitment to confidentiality of the negotiations, specifying the channels of communication between the parties, the type of data to be shared, and the commitment to good faith. So that the negotiations can begin, free from all obstacles.

The practical reality is full of applications at the national and international levels. Perhaps the closest example that comes to mind is the memorandum of understanding between the Saudi Telecommunications Company and Misk Charity. What is difficult for researchers is the failure to publish the terms of these understandings, especially since they affect the rights of shareholders and conflict with the principles of disclosure and transparency on which they are based. The process of trading in the financial market.

The Memorandum of Understanding is distinguished in terms of its legal effects in that it does not obligate any of the parties to conclude any future contract, but it guarantees the smooth conduct of the negotiation process, in terms of disclosure, exclusivity, confidentiality, and good faith. This does not deviate from the principles of Sharia law, which forbade selling najsh, harming others, and cheating in contracts.

In our discussion, we need to address the elements that differentiate the memorandum of understanding from other similar transactions, by which we mean the promise to contract and the initial contract as follows:
– The promise to contract is the will of the parties to devote themselves to concluding a future contract, and it is usually used in economic projects that require preliminary stages before their completion. The Saudi judiciary has settled in many of its commercial rulings that the promise to contract is not binding on the two parties as a general principle. Thus, the promise to contract differs from the understanding that the latter is binding on the parties.

-The initial contract, which means that the two parties agree on essential matters such as the price and the appraiser, and postpone secondary matters until the final contract. Its purpose is the desire of both parties to conclude the contract, but one of the parties does not have the required amount, or the necessary licenses, or would like to verify the extent of the appraiser’s compatibility with the system. General, and other reasons, and the truth is that I have not reached the basis or judicial officer for the binding of the primary contract in the Saudi courts.

The fundamental difference is evident in the fact that the initial contract was accepted by the offer and was contacted in the contract council, but the completion of the contract was postponed for a specified period, while the memorandum of understanding, as mentioned above, is nothing more than a prelude to the negotiations, that is, before the offer is coupled with acceptance.

With this, we leave you, dear ones, with the hope of meeting with you to discuss the suitability of memorandums of understanding for individuals in private financial transactions. Until then, I am pleased to receive your opinions via comments and e-mail: [email protected]