A Memorandum of Understanding (MOU), is a type of agreement written in good faith that provides the terms of a negotiation or transaction that will later be placed in a formal legal contract between 2 or more parties.
However, unlike a Letter of Intent, it gives a broad outline of the terms and conditions while an LOI only states the commitment to work together with another party.
It defines the roles and responsibilities of each party involved, acting as a guide to the terms of the future binding agreement.
An MOU is typically used to provide a structure for:
Treaties
Purchases
Partnerships
Use our MOU template to outline a document that lays out all the terms of your agreement with another party.
Reasons to Create a Memorandum
In certain situations, using a normal or business Memorandum of Understanding can be a significant first step to formalizing a transaction or negotiation.
You or another party may not want to jump into signing anything and if that’s the case here are some reasons why you should use an MOU:
Builds relationships: Crafting an MOU involves open communication and negotiation between all parties involved. This collaborative process can strengthen relationships, build trust, and establish a solid foundation for future interactions.
Formalizes informal agreements: A Memorandum of Understanding provides a written record of agreements that might otherwise be informal or verbal. It ensures everyone involved has a shared understanding of the agreement's terms and conditions, reducing the risk of misunderstandings.
Demonstrates intent: It symbolizes the intention to proceed with a joint endeavor, establishing initial trust and mutual understanding.
Provides clarity and direction: MOUs help provide a clear roadmap of what each party is expected to contribute to a partnership or project.