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Memorandum of Understanding

A Memorandum of Understanding is a nonbinding agreement between two or more parties that outlines the terms and details of a future collaboration or transaction.
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Frequently Asked Questions

A Memorandum of Understanding isn’t a legally enforceable document. However, bear in mind that some of the clauses might nevertheless be legally enforceable, such as non-disclosure agreements or privacy agreements. If you want to avoid that, you can include a clause stating that no part of your memorandum should be legally enforceable.

Many people believe that these two documents are the same, but that’s not entirely true, although they are very similar. A letter of intent is less formal than a memorandum, and it can never be legally binding, nor can any part of it be legally binding. In some states, there’s an even less formal document, known as a gentlemen’s agreement.
On the other hand, a Memorandum of Understanding can be legally binding if both parties agree on that.

You’ll often see abbreviations such as MOU or MOA, so don’t let them confuse you. In some states, a Memorandum of Agreement (MOA) and a Memorandum of Understanding (MOU) are considered the same thing. However, if you have to choose between the two, bear in mind that a Memorandum of Agreement is usually more formal and more binding then a Memorandum of Understanding.

No! Although you could make some parts of your memorandum legally binding, this document can’t be a substitute for a legal contract. But it makes contract drafting much easier because you already have certain information and know what to expect from the other party.