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A memorandum of understanding (MOU or MoU) is a formal agreement between two or more parties. Companies and organizations can use MOUs to establish official partnerships.

MOUs are not legally binding but they carry a degree of seriousness and mutual respect, stronger than a gentlemen’s agreement. Often, MOUs are the first steps towards a legal contract. In US law, a memorandum of understanding is synonymous with a letter of intent (LOI), which is a non-binding written agreement that implies a binding contract is to follow.

In business, an MoU is typically a legally non-binding agreement between two (or more) parties, that outlines terms and details of a mutual understanding or agreement, noting each party's requirements and responsibilities -- but without establishing a formal, legally enforceable contract (though an MoU is often a first step towards the development of a formal contract)

An MOU clearly outlines specific points of an understanding. It names the parties, describes the project on which they are agreeing, defines its scope, and details each party's roles and responsibilities.

Key Considerations:

  • A memorandum of understanding is a document that describes the broad outlines of an agreement that two or more parties have reached.
  • MOUs communicate the mutually accepted expectations of all of the parties involved in a negotiation.
  • While not legally binding, the MOU signals that a binding contract is imminent.
  • The MOU is most often found in international relations.
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