Contract Glossary
Memorandum of Understanding (MOU)
Definition
A formal document outlining the terms and details of an agreement between two or more parties before a binding contract is finalized. An MOU signals mutual intent, both sides agree on the broad strokes, but the document usually isn't legally enforceable unless it contains specific binding language.
In Practice
You're a nonprofit partnering with a corporate sponsor for a community event. Before drafting a full sponsorship agreement, you sign an MOU stating the sponsor will contribute $50,000 in exchange for logo placement and speaking slots. The MOU sets expectations and prevents misunderstandings while lawyers finalize the binding contract. If the sponsor backs out before the final agreement, the MOU alone usually won't let you force payment, but it creates a paper trail showing their commitment.
Example Clause
This Memorandum of Understanding sets forth the mutual intentions of the Parties regarding the proposed collaboration described herein. Unless expressly stated otherwise, this MOU is not intended to create legally binding obligations and shall not be construed as a contract or commitment to enter into a contract.
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