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A Memorandum of Understanding (MOU) is a formal document that two or more parties agree to sign, dictating how they will relate or interact over a specified duration. It is not legally binding, but it acts as a starting point that the parties can pick up from when they want the agreement to become legally binding.
An MOU contains the thoughts and expectations each party brings to the table and the common line of action reached. This document is similar to the traditional handshake or gentleman’s agreement. MOUs become legally binding when both parties agree to include particular legal terms and language and then sign it to effect.
When two parties agree to an MOU, they indicate that they have weighed each other’s views and positions and have come to an understanding. It also shows their commitment to move forward, as stated in the document. To ease the transitioning process to a contract, the parties need to communicate clearly during the MOU discussions and have it written in clear language and favorable terms.
When creating an MOU, both parties must be present to negotiate their positions. When everyone’s needs have been addressed, the parties draft the MOU to ensure they capture all the agreed-upon terms. Afterward, the parties review the document, make revisions where applicable, and the representatives sign it. The process then moves to the implementation stage, where everyone performs their role until the duration ends, or you transition to a legally binding contract.
The elements included in an MOU are relatively simple. The process is done on a friendly basis because the parties do not want to commit to a legally binding document yet. However, certain elements you cannot miss to have in your document are:
Entering a partnership using an MOU requires carefully thinking through the issues and ensuring you write them clearly. The format, sentence structure, language, and citation of laws must come together neatly to form a professional and effective document. EasyLegalDocs can help you create an MOU that meets all the required standards in your state or country.
MOUs can also be considered as testing the waters to measure the other party’s integrity as you work together without a heavy legal risk hanging on your shoulders. Using an MOU in the following situation can be of great benefit:
The benefits of an MOU outweigh its drawbacks because it places minimal emphasis on enforcing the law and its consequences but more on proving intent and good faith. The following table summarizes the pros and cons of an MOU.
| Pros of an MOU | Cons of an MOU |
| Allows all parties to state their goals and objectives | Not legally binding |
| Limits the risk of uncertainty | It can be confusing if not well-explained |
| Enables easy transition to a contract | Can risk an organization’s reputation if a party fails to fulfill their role |
| Gives both parties clarity with a written document |
An MOU takes time and resources to create, which can be worth it if the parties stick to it or a complete disaster if one or both parties change the requirements.
EasyLegalDocs cares about the legal documents you create. We offer free legal document templates that allow you to customize the details to your situation. Use our online editor and start working on a professional yet effective MOU to solidify your partnership.
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