The scope of the document and who will use what the MOU provides What they are going to be working on, the background of the project and why the MOU is being entered into Who the partners are and their contact information All of the details that an MOU may include should state or describe: This starting position for negotiations includes what that party is willing to offer to the other party or parties, their requests, and which points are open to further negotiation. In the initial stages of a negotiation, each party drafts its own best-case scenario MOU with all of the ideal outcomes of a hypothetical deal. MOUs can vary and be tailored to each organization’s or party’s needs. MOUs are frequently the preferred choice in international relations, particularly when major deals are in the planning stage, because they can be produced expeditiously and with relative secrecy. An MOU can also be put in place before the formalities of a contract when an agreement between parties has been reached but still requires written documentation. Techopedia Explains Memorandum of Understanding (MOU)Īn MOU is a non-binding preliminary agreement that falls somewhere between a handshake deal and a legal contract. This term is also known as memorandum of agreement (MOA) or as a letter of intent (LOI) in the United States. It is also used before or during the negotiation process to define a party’s initial position as a preliminary document that will be modified as the final deal is shaped. Although not legally binding, the MOU is a formal document that puts in writing the willingness of all parties to expedite the deal and move the contract forward. When the parties have reached an understanding that is acceptable by each of them, the MOU can be used to document all of the most important stances for each party. The MOU is often the starting point for negotiations, and is used to sketch out the purpose and scope of the forthcoming deal and make sure all parties are on the same page. Additionally, an MOU may be issued by smaller local businesses and municipalities (counties or townships, for example.) This is more expeditious than other forms of documentation and is used both by corporations (usually in high-stakes business dealings such as mergers) and by international agencies or nations (such as during treaty negotiations). It is not a legal agreement, but it does indicate the establishment of a business relationship that will continue and likely result in a legal agreement such as a contract.Īn MOU indicates that a legal contract will be forthcoming. What Does Memorandum of Understanding (MOU) Mean?Ī memorandum of understanding (MOU) is a document that describes a formal agreement between two parties.