Memorandum of Understanding

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,724 reviews

Jump to Section

Need help with a legal contract?

CREATE A FREE PROJECT POSTING
Post Project Now

What Is a Memorandum of Understanding?

A memorandum of understanding (MOU) is a written agreement between parties that expresses their aligned will. This type of document also details the intent of a common line of action. A memorandum of understanding can be bilateral (between two parties) or multilateral (between more than two parties).

You can think of a memorandum of understanding as a way for all parties to express that they agree to proceed with their mutual goals. An MOU indicates that the parties have reached an understanding and are ready to move forward. Though an MOU is not legally binding, it serves as a serious declaration that a binding contract is imminent.

On the scale of formal agreements, a memorandum of understanding is less formal than a contract but more formal than a handshake. A memorandum of understanding may sound a lot like a contract, but there are significant differences. For example, a contract is a private written agreement, and unlike an MOU, it is legally binding and enforceable by a judge.

The memorandum of understanding document is most often found in international relations. However, it is a common device in business negotiations as well.

Other Names for a Memorandum of Understanding

You may see this type of document referred to by a few different names. Common names for a memorandum of understanding include:

  • MOU
  • MoU
  • Memorandum of Understanding Form
  • MOU Agreement

When Should You Use a Memorandum of Understanding?

Here are a few common reasons for using an MOU:

  • You own a business and plan to partner with another business.
  • You own a small business and frequently partner with others.
  • Another business has asked about working with your business.
  • Your company and another business want to work on a specific project together.

Memorandum of Understanding Templates

Purchase and download fillable PDF templates that match your Memorandum of Understanding needs.
Joint Venture MoU
Used for potential Joint Ventures or Business Partnerships.
Service Agreement MoU
Used for potential Service Agreement with new customer.
Outsourcing MoU
Used for potential outsourcing agreement for new vendor.
Asset Purchase MoU
Used for potential Asset Purchase of new asset.
Share Purchase MoU
Used for potential share purchase of existing shares.
Business Relationship MoU
Used for potential new Business Relationship with another party.
*By purchasing a template, you acknowledge that you have read and understood ContractsCounsel's Terms of Use.

Is a Memorandum of Understanding Legally Binding?

Although an MOU is a formal document, it is typically not legally binding. Instead, the MOU is used to demonstrate each party's willingness to take whatever action is necessary to move a contract forward. The memorandum of understanding also defines the purposes and the scope of negotiations. In other words, the MOU document acts as the foundation for negotiations. These types of agreements are used frequently in:

  • Business opportunity discussions
  • Business opportunity negotiations
  • Treaty negotiations

A memorandum of understanding is the same as a letter of intent in United States law. MOUs are basically indistinguishable under the law from letters of intent and memoranda of agreement. These documents all discuss a mutually beneficial goal and the desire for the involved parties to complete this stated goal.

Here is some further reading about letters of intent.

Though MOUs themselves are not legally binding documents, they can include a clause that becomes legally binding. In those cases, a party that violates that clause can be held liable.

Key elements that may render a memorandum of understanding to be legally binding include:

  • An offer
  • Acceptance of that offer
  • Legally binding intention
  • Consideration (the benefit each party expects to get from the contract, such as payment or other compensation)

What Information Must a Memorandum of Understanding Include?

Though not limited to these details, a memorandum of understanding should include the following information:

  • Scope and intended action of the memorandum of understanding
  • Information about the project
  • Name of parties involved in the agreement
  • Respective responsibilities of the involved parties

The MOU should also include certain key facts, including:

  • When the agreement begins
  • The length of the agreement
  • When and/or how any party involved may terminate the agreement

Some MOUs also include contact information for the parties involved as well as potential dates for performance reviews.

How Does a Memorandum of Understanding Work?

Before preparing the document, the parties who are creating a memorandum of understanding must reach an understanding that all parties accept. Everyone involved should have clear information about the important stances each party holds. This way, the parties can create a complete and effective MOU document.

To create a memorandum of understanding, both (or all) parties typically first prepare their own MOU documents that discuss:

  • Ideal expectations
  • Desired outcomes
  • Any essential outcomes that they would not compromise on
  • How they believe the other stakeholders can benefit from the memorandum of understanding

A memorandum of understanding serves to demonstrate each party's initial position before entering into negotiations.

Image via Unsplash by sctgrhm

Advantages and Disadvantages of Creating an MOU

A memorandum of understanding comes with both benefits and drawbacks for the parties creating the agreement.

Advantages of an MOU include:

  • Clear objectives: A memorandum of understanding allows all parties to establish their mutual intentions. Parties can clearly state all of their objectives and goals.
  • Reduced uncertainty: An MOU typically makes the objectives and expectations of all parties very clear, so the document helps prevent potential future disputes from occurring.
  • Foundation for the future: The memorandum of understanding document already outlines terms and objectives, so you can easily use this document as a foundation for a binding contract in the future.
  • Ease of exit: On the other hand, if any party involved in the agreement feels that their goals and objectives are not being met, then they can easily end this type of agreement since it is not legally binding at the MOU stage.
  • Paper trail: Once a memorandum of understanding is finalized, it creates a clear record of the terms included in the negotiations.

The major disadvantage of a memorandum of understanding is that it is not legally binding. As a result, an MOU makes it very easy for any involved party to either exit the agreement or not meet the outlined requirements since these actions don't typically have consequences.

Although a memorandum of understanding is not a legally enforceable document, it is consistently viewed as a significant step. This is because drafting an effective MOU document requires all parties to put forth time and effort. The parties creating a memorandum of understanding must come to a mutual understanding, learn about what is most important to the others involved, and agree to move forward.

Uses of a Memorandum of Understanding

MOUs may come into play in a few sectors, including:

  • Private sector/private enterprises: A memorandum of understanding generally serves as a non-binding agreement during business or private enterprise dealings. MOUs are created without a legally enforceable or formal contract. In these situations, the MOU covers:
    • Responsibilities of all parties
    • Requirements of all parties
    • Terms and details of the agreement
  • Government and public affairs: MOUs may be used within government departments as well.
  • Public international law: MOUs are categorized as treaties on an international level. Therefore, they must be reviewed in the United Nations Treaty Collection. Especially when it comes to treaties, the intent of the parties creating the MOU and the positions of signatories must be presented to determine if the agreement is legally binding. The exact wording used throughout the agreement also comes into play when determining the MOU document's legality.

When signing a memorandum of understanding, it is important to create a clear document that all parties can agree to and understand. That's why it's so important to work with an experienced lawyer who can make sure that your MOU clearly states your goals, intentions, and expectations.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Memorandum of Understanding Lawyers

View David
Member Since:
July 15, 2020

David C.

Law Firm Principal
Free Consultation
Get Free Proposal
Miami, FL
41 Yrs Experience
Licensed in FL, NJ
University of Florida, Levin College of Law

David H. Charlip, the principal of Charlip Law Group, LC, is one of only 101 Board Certified Civil Trial Lawyers in Miami-Dade, with over 40 years of litigation experience. Mr. Charlip is also one of only 136 Florida Civil Law Notaries. He is also a Florida Supreme Court Certified Circuit Civil Mediator and a Florida Supreme Court Approved Arbitrator. He has managed and litigated cases across the country. Mr. Charlip has advised businesses, drafted business formation and purchase and sale documents and litigated business disputes for over 40 years and is very familiar with all aspects of contractual relations.

View Christopher
Member Since:
December 7, 2021

Christopher R.

Managing Attorney
Free Consultation
Get Free Proposal
Ohio
6 Yrs Experience
Licensed in FL, OH
Capital University Law School

Trusted business and intellectual property attorney for small to midsize businesses. Helping businesses start, grow, scale and protect.

View Lourdes
Member Since:
July 15, 2020

Lourdes H.

Attorney
Free Consultation
Get Free Proposal
Miami, FL
18 Yrs Experience
Licensed in FL, NJ
University of Miami, J.D.

With over 16 years of experience in the area of estate planning, trademarks, copyrights and contracts, I am currently licensed in Florida and NJ. My expertise includes: counseling clients on intellectual property availability, use and registration; oversee all procedural details of registration and responses with the USPTO/US Copyright Office; negotiate, draft and review corporate contracts and licensing; counsel clients on personal protection, planning and drafting comprehensive estate plans.

View Melissa
Member Since:
July 15, 2020

Melissa T.

Attorney and Law Firm Owner/President
Free Consultation
Get Free Proposal
Maitland, FL
20 Yrs Experience
Licensed in FL
University of Florida Levin College of Law

Melissa Taylor, the President and founding partner of Maurer Taylor Law, specializes in business contract review and drafting and is a second-generation attorney with private firm, in-house counsel, governmental, entrepreneurial, and solo practitioner experience. Melissa has a strong legal background, a dedication to customer service, is friendly, warm and communicative, and is particularly skilled at explaining complex legal matters in a way that's easy to understand. Melissa personally handles all client matters from start to finish to ensure client satisfaction.

View Lawrence
Member Since:
July 20, 2020

Lawrence S.

Attorney/Mediator/Arbitrator
Free Consultation
Get Free Proposal
Miami/Coral Gables, FL
41 Yrs Experience
Licensed in FL
University of Miami

Lawrence A. “Larry” Saichek is an AV rated attorney and a CPA focusing on business and real estate transactions, corporate law and alternative dispute resolution. With a background including five years of public accounting and six years as “in house” counsel to a national real estate investment company, Larry brings a unique perspective to his clients – as attorney, accountant and businessman. Many clients think of Larry as their outside “in house” counsel and a valued member of their team. Larry is also a Florida Supreme Court Certified Mediator and a qualified arbitrator with over 25 years of ADR experience.

View Brett
Member Since:
July 15, 2020

Brett G.

Attorney
Free Consultation
Get Free Proposal
New York, NY
33 Yrs Experience
Licensed in NY
New York University

Entertainment Attorney with 30+ years of experience, representing all aspects of the TV, Film, Music and Publishing Industries

View Aaron
Member Since:
July 15, 2020

Aaron M.

Shareholder
Free Consultation
Get Free Proposal
New York, NY
12 Yrs Experience
Licensed in NJ, NY
Fordham University School of Law

Aaron focuses his practice on entrepreneurs and emerging growth companies, providing general counsel services for companies from formation through exit. Aaron frequently advises clients in connection with routine and unique legal, business, and strategic decisions, including corporate, business and technology transactions, angel and venture financings, mergers and acquisitions, protection of intellectual property, and information privacy and data security.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call