What is a Memorandum of Understanding?

A memorandum of understanding, often referred to as an “MOU,” is a type of agreement between parties that is not legally binding? Why have an agreement at all if it is not legally binding? Great question. 

The purpose of a memorandum of understanding is to outline the responsibilities of the parties to a memorandum of understanding. Here, a memorandum of understanding can be a step toward creating a future legally binding agreement, a contract. Generally, a memorandum of understanding addresses the intent of parties as opposed to a formal commitment. 

To ensure that a memorandum of understanding is not binding, it is important how the document is written. For example, if a memorandum of understanding is signed with intent to exchange money for goods or services, as an example, it may be characterized as a contract and may be construed as legally binding. 

There are other concerns as well that may impact how a memorandum of understanding may be interpreted by the parties or a court in the event of a dispute. Here, regardless of how “solid” you may think your memorandum of understanding may be, it will be helpful to discuss the potential future consequences of your memorandum of understanding with a lawyer that is experienced in the law of contracts.

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