Is a Memorandum of Understanding Legally Binding?


A Memorandum of Understanding is a document that outlines the details of a commitment between two or more parties collaboratively working together toward a common goal or purpose and sharing resources or services in the process.

This kind of informal contract works well in a variety of business settings for business people, entrepreneurs and organizations where the parties do wish to form an agreement without assuming legally binding obligations.

Major benefits of an MOU include, their flexibility and scalability allows people to tailor them to their personal circumstances and that one may solidify an intent to work together without necessarily forming a binding legal agreement.

Many times the simple statement consisting of the basic parts of the understanding signed by both parties will suffice to form the Memorandum of Understanding as we discussed in the video how to write a quick memorandum of understanding.

In other circumstances where the project or situation may be more complex, have organizational regulations or the parties feel that they need more security or clarity, a more detailed MOU may serve the situation better as we discussed in the video how to write an advanced Memorandum of Understanding.

As previously stated a Memorandum of Understanding is not a formal contract, its power and purpose lie in its ability to clearly communicate intent and in this way forms a pact of honor and trust rather than legal ties.

A Memorandum of Understanding is stronger and more formal than a solely verbal understanding like the traditional handshake or gentlemen’s agreement.

Both kinds of deals communicate the intent of the people involved but the MOU is far more formal in that it takes the agreement further, documenting the agreed on terms and all parties committing their signature to the document.

While this act demonstrates stronger intention of the parties and to follow through on the agreement more than just a passing commitment or a half-hearted agreement which the person never actually meant to fulfill.

A Memorandum of Understanding is not fully binding in the same way that a contract is either. A Memorandum of Understanding is given weight in a court of law should one party fail to meet the obligations of the memorandum.

Because it does communicate the intent of that party however more components than simply intent must be met to establish a fully legally binding contract and if you need to establish a fully legally binding contract you need to seek legal counsel.

A Memorandum of Understanding can be the first stage in the formation of a formal contract, it can be a temporary agreement of how a deal will function while a formal agreement is being put in place. It can be also an agreement to work on a portion of a project.

It can also be an agreement to so-called test-drive, someone services or a collaborative arrangement. the use of a Memorandum of Understanding is highly dependent upon your personal circumstances and it’s flexibility is the main part of its appeal. A Memorandum of Understanding may also be used as a synonym for letter of intent especially in private law.

A letter of intent is used to express interest in performing a service or involvement in an activity, again without legally obligated either party. So what does this mean, use a memorandum of understanding when you want more structure and commitment than a verbal agreement however you do not intend to legally obligate party.

If you want a legally binding contract again you should seek legal counsel.

For more information about how you can write your own in your own MOU for excellent tools about writing MOU’s, I suggest you go to They also have an excellent Auto completion feature which can guide you through filling in all the parts of an MOU.