Memorandum of Understanding

A Memorandum of Understanding, also known as MOU, is an agreement between two or more parties outlining the terms and conditions of an intended transaction. This is the first stage of the formation of a formal contract.

This document describes the parties, the project or transaction, the purpose of the MOU, the general obligations of the parties, and the precise roles and responsibilities of the parties. In an MOU, parties can agree to embark on diverse projects, including research collaborations, joint ventures among businesses, partnerships, business mergers, supply agreements, etc.

This document can be used at a contract negotiation stage between parties. This is the stage where parties are deliberating on the fundamental terms of the project. This is also the stage where parties either do not imply a legal commitment or where the terms of the MOU are still subject to a final contract. It can also be used at the final stages of negotiation to create a binding obligation on parties.

Are MOUs Legally Binding?

Ordinarily, the MOU is not legally binding, which means that parties are not required to comply with the provisions of the agreement. This is true because MOUs are usually drafted during the early stages (negotiation stage) of a Partnership Agreement, Joint Venture Agreement, Collaboration Agreement, or other agreement when parties are still in the process of negotiating terms and details. At this stage, there may be uncertainties or incomplete information regarding the final agreement. Hence, parties use MOUs to outline their intentions and initial understanding without committing to legally enforceable obligations.

On the other hand, the MOU can be legally binding if the parties have a completed bargain that has been settled by all the parties to the MOU. It will also be legally binding if there are all the elements of the contract, such as offer, acceptance, consideration, and intention to create a legal relationship, as described below:

• Offer. An offer occurs when the parties proffer something (for example, a business arrangement) to another.
• Acceptance. This is when all the parties accept all the terms and conditions of the MOU.
• Consideration. The consideration is the benefit, such as money or other money's worth bargained for by the parties to this MOU.
• Intention to create legal relations. It means that all the parties to the MOU intend to be bound by the MOU.

Overall, an MOU can be either legally binding or not depending on how the MOU is drafted and whether all the elements of a contract are present in the MOU.

How to use this document

This document requires basic information about the parties entering the MOU, the intended project the parties are collaborating to execute, including timelines for completion, and the roles of the parties.

After completing this form, the document should be printed and all the parties should sign the document. Alternatively, signing can be done electronically.

If either of the parties is an individual, the party should sign and have the document attested to by at least one witness. If a party is a company, either two (2) directors or one (1) director and one (1) company secretary should sign the document and the common seal of the company may be affixed on the document.

After signing, all the parties should keep at least one signed copy of this document for their record.

Applicable law

The general laws of contract apply to this document.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.