The MOU should also include certain key facts, including: Respective responsibilities of the involved parties Name of parties involved in the agreement Scope and intended action of the memorandum of understanding Though not limited to these details, a memorandum of understanding should include the following information: What Information Must a Memorandum of Understanding Include? Key elements that may render a memorandum of understanding to be legally binding include:Ĭonsideration (the benefit each party expects to get from the contract, such as payment or other compensation) In those cases, a party that violates that clause can be held liable. Though MOUs themselves are not legally binding documents, they can include a clause that becomes legally binding.
These documents all discuss a mutually beneficial goal and the desire for the involved parties to complete this stated goal. MOUs are basically indistinguishable under the law from letters of intent and memoranda of agreement. These types of agreements are used frequently in:Ī memorandum of understanding is the same as a letter of intent in United States law. In other words, the MOU document acts as the foundation for negotiations. The memorandum of understanding also defines the purposes and the scope of negotiations. Instead, the MOU is used to demonstrate each party's willingness to take whatever action is necessary to move a contract forward. Is a Memorandum of Understanding Legally Binding?Īlthough an MOU is a formal document, it is typically not legally binding. *By purchasing a template, you acknowledge that you have read and understood Your company and another business want to work on a specific project together. You own a small business and frequently partner with others.Īnother business has asked about working with your business. You own a business and plan to partner with another business. Here are a few common reasons for using an MOU: When Should You Use a Memorandum of Understanding? Common names for a memorandum of understanding include: You may see this type of document referred to by a few different names. Other Names for a Memorandum of Understanding However, it is a common device in business negotiations as well. The memorandum of understanding document is most often found in international relations. For example, a contract is a private written agreement, and unlike an MOU, it is legally binding and enforceable by a judge. A memorandum of understanding may sound a lot like a contract, but there are significant differences. On the scale of formal agreements, a memorandum of understanding is less formal than a contract but more formal than a handshake. Though an MOU is not legally binding, it serves as a serious declaration that a binding contract is imminent. An MOU indicates that the parties have reached an understanding and are ready to move forward. 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. A memorandum of understanding can be bilateral (between two parties) or multilateral (between more than two parties). This type of document also details the intent of a common line of action. A memorandum of understanding (MOU) is a written agreement between parties that expresses their aligned will.
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