Set forth terms for a new business relationship: Memorandum of Understanding
What we’ll cover
What is a Memorandum of Understanding?
A Memorandum of Understanding (MOU) is a written document that outlines the intention of two or more parties to work together on a project or business relationship. It describes the shared goals of the parties and explains what each party expects to contribute.
An MOU is typically used in the early stages of a partnership when the parties want to document their understanding without creating a fully binding contract. It helps clarify roles, responsibilities, and expectations while allowing flexibility as negotiations continue.
Although an MOU usually is not legally binding, it can serve as a framework for a future contract. By documenting the basic terms of a partnership or collaboration, an MOU helps ensure that all parties share the same expectations before moving forward.
When to use a Memorandum of Understanding:
- You're a business owner about to partner with another business.
- You own a small business and commonly partner with others.
- Another business has asked to work with your business.
- You and another company want to collaborate on a project.
- Your business wants to outline shared goals before drafting a formal contract.
How do I get my Memorandum of Understanding reviewed?
If you already have a Memorandum of Understanding and want to have it reviewed, or if you have questions about creating or using one, there are a few ways to get help.
Use Rocket Copilot to ask questions or review your document; this helps you better understand what it says and identify anything that may need a closer look.
If you are looking for help from a Legal Pro, you can also ask a question and receive a response within one business day, or request a more in-depth document review.
Sample Memorandum of Understanding
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Memorandum of Understanding
This Memorandum of Understanding (the "Memorandum") is made on , by and between , of , , (hereinafter referred to as "") and , of , , (hereinafter referred to as "") for the purpose of achieving the various aims and objectives relating to the (the "Project").
WHEREAS and desire to enter into an agreement in which and will work together to complete the Project;
AND WHEREAS and are desirous to enter into a Memorandum of Understanding between them, setting out the working arrangements that each of the partners agree are necessary to complete the Project;
Purpose
The purpose of this Memorandum is to provide the framework for any future binding contract regarding the between and .
Obligations of the Partners
The Partners acknowledge that no contractual relationship is created between them by this Memorandum, but agree to work together in the true spirit of partnership to ensure that there is a united visible and responsive leadership of the Project and to demonstrate financial, administrative and managerial commitment to the Project by means of the following individual services.
Cooperation
The activities and services for the Project shall include, but not limited to:
| a. | Services to be rendered by include: |
| b. | Services to be rendered by include: |
Resources
The Partners will endeavor to have final approval and secure any financing necessary to fulfill their individual financial contributions at the start of the planning for the development of the Project.
| a. | agrees to provide the following financial, material and labor resources in respect of the Project: |
| b. | hereby agrees to provide the following financial, material and labor resources in respect of the Project: |
Communication Strategy
Marketing of the vision and any media or other public relations contact should always be consistent with the aims of the Project and only undertaken with the express agreement of both parties. Where it does not breach any confidentiality protocols, a spirit of open and transparent communication should be adhered to. Coordinated communications should be made with external organizations to elicit their support and further the aims of the Project.
Liability
No liability will arise or be assumed between the Partners as a result of this Memorandum.
Dispute Resolution
In the event of a dispute between the Partners in the negotiation of the final binding contract relating to this Project, a dispute resolution group will convene consisting of the Chief Executives of each of the Partners together with one other person independent of the Partners appointed by the Chief Executives. The dispute resolution group may receive for consideration any information it thinks fit concerning the dispute. The Partners agree that a decision of the dispute resolution group will be final. In the event the dispute resolution group is unable to make a compromise and reach a final decision, it is understood that neither party is obligated to enter into any binding contract to complete the Project.
Term
The arrangements made by the Partners by this Memorandum shall remain in place from until . The term can be extended only by agreement of all of the Partners.
Notice
Any notice or communication required or permitted under this Memorandum shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the address set forth in the opening paragraph or to such other address as one party may have furnished to the other in writing.
Governing Law
This Memorandum shall be construed in accordance with the laws of the State of Commonwealth of .
Assignment
Neither party may assign or transfer the responsibilities or agreement made herein without the prior written consent of the non-assigning party, which approval shall not be unreasonably withheld.
Amendment
This Memorandum may be amended or supplemented in writing, if the writing is signed by the party obligated under this Memorandum.
Severability
If any provision of this Memorandum is found to be invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Memorandum is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
Prior Memorandum Superseded
This Memorandum constitutes the entire Memorandum between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and Memorandums, whether written or oral.
Understanding
It is mutually agreed upon and understood by and among the Partners of this Memorandum that:
| a. | Each Partner will work together in a coordinated fashion for the fulfillment of the Project. |
| b. | In no way does this agreement restrict involved Partners from participating in similar agreements with other public or private agencies, organizations, and individuals. |
| c. | To the extent possible, each Partner will participate in the development of the Project. |
| d. | Nothing in this memorandum shall obligate any Partner to the transfer of funds. Any endeavor involving reimbursement or contribution of funds between the Partners of this Memorandum will be handled in accordance with applicable laws, regulations, and procedures. Such endeavors will be outlined in separate agreements that shall be made in writing by representatives of the Partners involved and shall be independently authorized by appropriate statutory authority. This Memorandum does not provide such authority. |
| e. | This Memorandum is not intended to and does not create any right, benefit, or trust responsibility. |
| f. | This Memorandum will be effective upon the signature of both Partners. |
| g. | Any Partner may terminate its participation in this Memorandum by providing written notice to other Partner. |
The following Partners support the goals and objectives of the :
Signatories
This Agreement shall be signed on behalf of by , , and on behalf of by , its . This Agreement shall be effective as of the date first written above.
| By: | Date: |
, its
| By: | Date: |
, its
Memorandum of Understanding
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Next Steps: Make it Legal
| _____ | Look over the Subordinated Loan Agreement to ensure it matches your intentions. If you need to make changes to the Agreement outside of the interview, you will be able to make changes online or in Word format in the Document Manager at the end of the process. |
| _____ Have the Parties sign and date the Subordinated Loan Agreement in duplicate. You can also use Rocket Lawyers e-signature service to electronically sign and share the document. |
| _____ | Deliver a copy of the Subordinated Loan Agreement to the other Parties. |
Copies
| _____ | Keep a copy of all documents for your own records and in case there is a problem. |
| _____ Each Party should receive an original signed copy of the Subordinated Loan Agreement. Your copy should be kept in a safe place. If you signed a paper copy of your document, you can use Rocket Lawyer to store and share it. Safe and secure in your Rocket Lawyer account, you can access it any time from any computer, as well as share it for future reference. |
Members can always consult an attorney at no extra cost!
| _____ If you have quick questions or wish to review this document with an attorney, you can do so for free. Rocket Lawyer's On Call® service makes it fast and easy to speak with a local attorney. Get started by visiting the Find a Lawyer tab on our site, or calling (866) 243-2183. |
About Memorandums of Understanding
Learn about how to set forth terms for a new business relationship
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When is an MOU important?
A Memorandum of Understanding is especially useful during the early stages of a partnership, joint venture, or collaboration. It allows parties to document the basic structure of a project while they continue discussing the final details of a legally binding agreement.
MOUs are often used when organizations want to establish cooperation but are not ready to finalize a full contract. For example, two companies may sign an MOU to explore a joint project while still negotiating the final legal terms.
MOUs are also commonly used in international collaborations, where different legal systems may make it helpful to first agree on the general terms of cooperation before drafting a formal agreement.
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Advantages and disadvantages of an MOU
Before creating a Memorandum of Understanding, it may help to understand both its benefits and limitations.
Advantages
- Clarity
An MOU allows all parties to clearly state their goals, responsibilities, and expectations, helping prevent misunderstandings. - Flexibility
Because MOUs are usually not legally binding, they allow the parties to adjust the terms as the partnership develops. - Lower risk
An MOU allows businesses to explore partnerships without committing to a fully binding contract too early. - Efficiency
Compared to formal contracts, MOUs are often simpler and faster to prepare.
Disadvantages
- Limited enforceability
One notable limitation of an MOU is its nonbinding nature. While this can be helpful in early negotiations, it also means a party may withdraw or change expectations more easily than with a contract.
Still not sure if an MOU is right for you? You may want to ask a Rocket Lawyer network attorney for legal advice.
- Clarity
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The difference between an MOU and an MOA
A Memorandum of Understanding (MOU) and a Memorandum of Agreement (MOA) are similar documents but differ in their legal strength.
An MOU generally outlines a shared understanding and the intention to work together. It focuses on describing the goals of the relationship and the responsibilities of each party but usually does not create a binding contract.
An MOA, on the other hand, often functions more like a formal contract. It typically includes more detailed obligations and may be legally enforceable if one party fails to meet the agreed terms.
In many situations, organizations begin with an MOU and later move to a formal agreement or MOA once the details of the partnership are finalized.
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Common terms in a Memorandum of Understanding
A Memorandum of Understanding is used to set out the basis for a future agreement between two business partners. To do this, it typically includes several key sections.
Introduction and status of negotiations
This section identifies the parties involved, describes the project or partnership, and states that the parties intend to work together. It also includes the effective date of the MOU.Obligations of the partners
This section outlines the responsibilities of each party. It may include both cooperation terms and the resources each party will contribute to the project.Dispute resolution
This section explains how the parties will resolve disputes, often through mediation or another form of alternative dispute resolution.Severability
A severability clause explains that if one provision of the MOU is found invalid or unenforceable, the rest of the document will remain valid.Superseding provisions
If the parties previously signed another MOU, this section clarifies whether the new document replaces earlier agreements or whether certain earlier terms still apply. -
What to include in your MOU
Most Memorandums of Understanding include several important elements:
- The names of the parties involved
- The purpose of the agreement
- The roles and responsibilities of each party
- The duration or term of the partnership
- Any resources or contributions each party will provide
- Signatures confirming agreement
Using a template can help ensure all of these important elements are included in your document.
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How to write a Memorandum of Understanding
Creating an MOU is an important step when starting a partnership or collaborative project. Whether the project is large or small, documenting expectations early can help prevent misunderstandings later.
Using a Memorandum of Understanding template can simplify the process and help ensure nothing important is overlooked. The process usually involves:
- Reviewing the document to confirm it fits your situation.
- Answering a few questions to personalize the MOU.
- Signing the document.
- Sending it to the other party for their signature.
Once completed, the MOU can serve as a clear reference point for the partnership as the parties move toward a more formal agreement.
Memorandum of Understanding FAQs
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What is the purpose of a Memorandum of Understanding (MOU)?
A Memorandum of Understanding helps you and your partner think through how a future agreement may work before a legally binding contract is signed. It defines the project, the parties involved, and what each party is expected to contribute.
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What information is included in an MOU?
To make a Memorandum of Understanding using Rocket Lawyer, you typically provide:
- Dates for when the MOU begins and ends
- Contact information for the parties involved
- The project or partnership name
- The contributions each party will make
- Any financial, material, or labor resources involved
The rest of the document can then be generated automatically and customized if needed.
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Is a Memorandum of Understanding legally binding?
Generally speaking, no. A Memorandum of Understanding outlines the intention of making a legal agreement, but it is not usually legally enforceable on its own.
While it may not be enforceable in court, it is still a valuable tool for clarifying expectations before drafting a formal agreement.
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What is the difference between an MOU, a Partnership Agreement, and a Letter of Intent?
A contract or Partnership Agreement is usually legally binding and establishes a formal legal relationship between the parties. A Memorandum of Understanding typically outlines the intent to work together before that stage.
A Letter of Intent is another similar document that outlines a planned agreement, often used when negotiating the purchase of a company or business interest.
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What other documents might be helpful for my business?
If you're using a Memorandum of Understanding, you might also consider:
- General Contract for Services
- Partnership Agreement
- Joint Venture Agreement
- Non-Disclosure Agreement
If you have any questions about what's right for you and your business, connect with a Legal Pro for quick answers or a document review.
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