Re: Vetting of Memorandum of Understanding
We have perused the draft MOU to be executed between Y and XL. The MOU appears to be mere understanding with no intention of the parties to formalise their understanding in legal terms in the near future.
This legally unenforceable document will run for 5(five) years binding neither parties.
The subject matter of this MOU is no merely to assist or transfer technology but also to set up an aerosol production plant, with the assistance of Y in providing layout plans, equipment, gas etc., the effect of such deliverables which will have a long term and permanent effect on the plant.
The draft MOU does not afford any legal protection to XL at all. The terms and conditions therein are not legally binding or enforceable against Y or XL. In simple terms, if Y supplies XL erroneous layout drawings and as a result from such erroneous drawings XL’s installation collapses and XL suffers loss, there can be no claim against Y or if the equipment to be provided by Y is not fit for its purpose and thereby XL cannot go for production or achieve the determined production capacity, Y cannot be held liable, nor do they have any obligations to repair or replace the defective equipment or reimburse XL, nor can XL claim for damages.
We are not sure what the cost is involved here or what form of consideration is involved in this transaction. However, this sort of transaction requires more than a mere MOU to tie each party to perform its obligations. Even if the supply of the equipment is for a cost or value lesser than the equipment itself, or if the equipment is on a “ as is where is basis”, there should be some legally contracted parameters. XL will be investing and its investment will be based on the deliverables. If the deliverables are not fit of its purpose, XL’s investment will be at risk.
The draft MOU in its present from contains merely a list of actions each party may do for the other without any obligations to do so or legal implications and hence we have no comments on the draft.
If you have any further queries, please revert back to us.
Thanking you. SPL
As we understand, XLimited contemplates to set-up a LPG unit for production of Aerosol and in pursuant to that has approached COMPANY 1 (Y) to provide technical assistance. Y agreed on the same and sent the draft Memorandum of Understanding (MOU) to be executed by and between both the parties. We have perused the draft MOU and our opinion is as follows:
|SL No.||Paragraph No.||Observations|
|1||Statement as to the parties||The statement as to the parties should be re-arranged as follows:
COMPANY 1 , a joint venture company amongst Westfarmers Limited of Australia and Elpiji(M) Sdn. Bhd. of Malaysia, incorporated in Bangladesh under the relevant Companies Act 1994, having its registered office at ______________, hereinafter referred to as ‘Y’ (which expression shall where the context so admits mean and include its representatives, executors, administrators, successors-in-interest and assigns) of the FIRST PART
XLimited, a company incorporated under the relevant Companies Act 1994, having its registered office at __________________, Dhaka, hereinafter referred to as ‘XL’ (which expression shall where the context so admits mean and include its representatives, executors, administrators, successors-in-interest and assigns) of the SECOND PART
|2||Preamble||As we understand the technical assistance shall be provided by Y free of charge. In the light of that the preamble may be rearranged as follows:“ Whereas Y is engaged in importation, bottling and distribution of Liquefied Petroleum Gas (LGP) throughout Bangladesh. and also engaged in implementing improved and up to date technologies in the field of LGP. Y has considerable interest in assisting different entrepreneur in setting up LGP unit or a project whatsoever free of charge and ensure the overall business objectives.
XL being engaged in manufacturing of Agro Vet products and being desirous of setting-up a LGP unit for production of Aerosol approached Y for support and assistance to set-up the same.
Y knowing the requirement of XL have the requisite expertise, agreed to implement the LGP unit of XL by extending improved technical support under the following terms and conditions:”
|3||Rationale and Identity of the Organization||We suggest the deletion of both clauses due to repetition in preamble.|
|4||Activities||The scope and the activities is solely upon Square to decide. Please cheque whether any addition be made with the stipulated activities.However, as far as Supplying of LP gas in continuous basis is concerned, it is not apparent at whose cost such supplying shall be made. Please look into the matter.|
|5.||Tenure||The entire clause may be re-arranged as follows:
“This Memorandum shall be valid up to 5(five) years from the date of its signature and thereafter until and unless terminated by either party giving to the other not less than 1(one) month notice in writing”.
|6||New Clauses||It is advised to incorporate the following clauses : Representation and Warranties:
1. Both the parties represent and covenant that they have right and authority to execute the present MOU and shall be responsible for any loss caused by any unauthorised activities to the other party.
2. Y shall be responsible for any loss caused to the XL by the defective performance, non-performance or delayed performance of any of the obligation under these presents.
3. During the course of implementing the LGP unit, Y will ensure that in all respects the activities comply with all relevant requirements of law and comply with all regulations/statutes issued from time to time by the Government/Parliament of Bangladesh.
Both the parties shall have no liability in respect of any delay in carrying out the activities or failure to carry out the activities under these presents caused by fire, strikes, or other industrial or banking action or dispute, acts of government, or any circumstances outside the reasonable control of the parties hereto.
Each party shall indemnify or keep indemnified the other party for any loss, costs and expenses caused to the other party due to the negligence, mishandling, application of less technical support or for any other reason whatsoever.
All disputes and differences concerning the validity, scope, meaning construction or effect of this Memorandum or any dispute or disagreement between the parties hereto as to any matter relating to this Memorandum which cannot be settled by mutual discussion shall be settled by arbitration by 2 (Two) Arbitrators, appointed by each parties, in case of difference of opinion between the said two Arbitrators to an Umpire, who shall be appointed by the Arbitrators, and any such decision is binding on the parties hereto within the meaning of Arbitration Act, 2001.
None of the provisions of this Memorandum shall be deemed to constitute a partnership or joint venture amongst the parties hereto
This Memorandum shall be binding upon the successor-in-interest, legal representatives, administrators and assigns of the parties hereto.
Subject to the above observations and some typographical errors the other terms were found in order.
For: “The Lawyers & Jurists”
M.L.Hotel Tower Ltd,208,Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.