Memorandum of Understanding (MOU)
Also known as: MOU
A memorandum of understanding (MOU) is a document that records the shared intentions of two or more parties to work together, usually before a binding contract is signed.
An MOU sets out the broad understanding between parties — objectives, roles and the areas they intend to cooperate on — without necessarily creating full legal obligations. It signals serious intent and provides a framework for the more detailed contract that may follow, which is why it is common at the start of partnerships and joint initiatives.
Whether an MOU is legally binding depends on its wording and the parties' intentions, so careful drafting matters. In procurement, an MOU can precede a supply agreement or framework arrangement, giving both sides confidence to invest in due diligence and negotiation before committing to firm terms.
Frequently asked questions
- What is a memorandum of understanding?
- An MOU is a document that records the shared intentions of parties to cooperate, outlining objectives and roles, typically as a step before a binding contract is negotiated.
- Is a memorandum of understanding legally binding?
- It depends on the wording and the parties' intentions. Many MOUs are non-binding statements of intent, but specific clauses can be made binding, so the language should be drafted carefully.
Related terms
Letter of Intent (LOI)
A letter of intent (LOI) is a document that declares one party's intention to enter into a contract or transaction with another, often outlining key terms before the final agreement.
Read definitionContract Management
Contract management is the process of creating, executing, tracking and renewing supplier contracts to ensure both sides meet their obligations and value is realised.
Read definitionFramework Agreement
A framework agreement is a long-term contract that sets agreed terms and pricing with one or more suppliers, from which specific orders are called off as needed.
Read definitionExplore related across the knowledge graph
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