Memorandum of Understanding (MoU)

Memorandum of Understanding (MoU)

What is a Memorandum of Understanding (MoU)?

A memorandum of understanding (MoU) is a type of agreement between two (bilateral) or more (multilateral) parties outlined in a formal document. It is not legally binding but it expresses a convergence of will between the parties to move forward with a contract.

It defines the scope and purpose of the talks which can be seen as the starting point for negotiations. Such memoranda are also used in high-stakes business dealings such as merger talks. Memorandum of Understanding (MoU) is often seen in international treaty negotiations.

How an MOU works?

MOU is not legally binding but it is a serious declaration that a contract is imminent. An expression of an agreement to proceed indicates that the parties have reached an understanding and are moving forward with the contract.

MoU communicates the mutually accepted expectations of all of the parties, organizations, or governments involved in a negotiation. No matter their length or complexity the two objectives of a Memorandum of

Understanding (MoU) is generally they’re not legally binding, in part because neither party wants to deal with the ramifications of a binding agreement, and they don’t involve the exchange of money.

What are the requirements when drafting a Memorandum of Understanding (MoU)?

  • State the overall intent of the MOU
  • The Parties
  • The Period
  • Assignments/Responsibilities
  • Disclaimers
  • Financial Arrangements
  • Risk Sharing
  • Signatures