A memorandum of understanding (MOU) is an agreement between two or more parties outlining the terms, responsibilities and expectations of the parties involved in a specific agreement. The MOU is not a legally binding document, but instead serves as a foothold in a negotiation process. This document identifies essential elements of an agreement, such as how parties will communicate and the responsibilities each party must uphold, in order to help avoid misunderstandings and issues once a contract is signed.

MOUs are most commonly found in international relations, in sectors such as trade, economics, and financing. A typical MOU outlines the goals and objectives of the agreement, a timeline, and any shared resources, such as money or technology that the parties may need to exchange.

The document will also outline the expectations of each party and the actions they are expected to take. The document will also establish procedures for resolving disputes and discrepancies should they arise. The MOU has legal implications and consequences if parties do not hold up their side of the agreement, especially for larger companies, where potential damages can range from a breach of contract to a lawsuit.

MOUs are 100% customisable and can be used for almost any type of agreement. This makes them ideal for transitioning from a verbal agreement to a more formalised arrangement. The most important element of an MOU is its ability to explain, in clear language, the parties’ expectations and what agreement each side will uphold.

Creating a thorough MOU is important in order to ensure that all parties involved understand their respective roles and expectations. It is a good starting point for any contract negotiation and often serves as a legal reference. For those reasons, creating a mutual understanding between the parties involved should always be the main goal of any MOU.