What Is a Memorandum of Understanding (MOU)?
A memorandum of understanding (MOU) is a written agreement between two or more parties that explains how they plan to work together. It is formal but usually not legally binding. Although it shows good-faith intentions, it cannot be enforced in court, although it may provide clarity in the event of a later contract dispute between the parties (20 CFR § 662.300).
The purpose of an MOU is to set expectations, define roles, and outline goals before a contract is signed. You can think of it as a handshake in writing. It gives both sides clarity and structure.
MOUs are often used for business partnerships, joint ventures, research collaborations, and non-profit agreements. In the US, they function like a letter of intent (LOI) or a letter of agreement (LOA). These documents help everyone agree on the plan before signing a binding contract. The MOU should be signed by an authorized representative from each party.
How to Write a Memorandum of Understanding
A well-written MOU agreement lays out the purpose of the relationship, the responsibilities of all parties involved, and how the collaboration will work before signing a formal contract. Here is a step-by-step guide on how to write a memorandum of understanding:
Step 1 – Identify the Parties
List the full legal names, addresses, and roles of everyone involved. The MOU should clearly identify each individual or organization to avoid confusion later.
Step 2 – State the Purpose and Goals
Explain why the agreement exists and what the parties are hoping to achieve. For example, a business partnership agreement might focus on launching a joint project. Similarly, a non-profit organization might use an MOU to outline how they will share resources and work together on community projects.
Step 3 – Define the Scope of Work
Give a clear description of the project or collaboration. This section should explain what the MOU covers and what it doesn’t. For example, in a research collaboration, the MOU could cover sharing data and lab space but not funding obligations.
Step 4 – Outline Responsibilities
Write out what each party agrees to do. An MOU with clearly defined responsibilities reduces the risk of misunderstandings and helps parties hold each other accountable.
Step 5 – Detail Resources and Contributions
Include all resources each party will contribute, such as time, funding, staff, or equipment. If no financial contribution is expected, state that clearly within the memorandum of understanding.
Step 6 – Include Confidentiality Provisions (Optional)
If sensitive information will be shared between the parties, you can add a confidentiality clause to protect trade secrets or proprietary data.
Under the Federal Trade Secrets Act, 18 USC § 1836, businesses can take legal action if trade secrets are misused. For stronger protection, you may also want to create a complete confidentiality agreement (also known as a non-disclosure agreement).
Step 7 – Define Termination Conditions
State when and how the MOU can end. This may include mutual agreement, completion of the project, or a specific end date by which the memorandum of understanding will end.
Step 8 – Add Dispute Resolution Procedures
Detail how conflicts will be handled or resolved, such as mediation or arbitration, so the parties don’t have to rely on costly lawsuits.
Step 9 – Sign and Date
Each party should sign and date the MOU to confirm that they agree to the terms. The signature should come from an authorized representative, such as a business owner, non-profit director, government official, etc. This confirms that the right person is approving the agreement. Note that signing a memorandum of understanding agreement doesn’t make it enforceable in court. But it does show that both sides clearly understand and agree to what’s been outlined.
Memorandum of Understanding (MOU) vs. Memorandum of Agreement (MOA)
MOU and MOA are documents that formalize a working relationship between two parties. The main difference is that an MOU is usually non-binding, while an MOA can be binding if it meets contract requirements.
| MOU | MOA |
|---|---|
| Not legally binding | Often legally binding |
| Broad, general terms | Specific, detailed terms |
| Early-stage collaborations | Formal, enforceable agreements |
| No exchange of money | May involve funding, assets, or services |
Choose an MOU if you’re in the early stages of a partnership and want to agree on roles and goals without any legal commitment. Choose an MOA if you’re ready to move forward with a formal agreement that could be enforced in court, especially if money, property, or other assets and resources are involved.
Sample Memorandum of Understanding
See how a completed memorandum of understanding is structured, from naming the parties to outlining responsibilities. Use the sample as a guide, then customize our free MOU template before downloading it in PDF or Word format.
