Memorandum of Understanding (MOU)

Definition - What does Memorandum of Understanding (MOU) mean?

A memorandum of understanding (MOU) is a document that describes a formal agreement between two parties. 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.

This term is also known as a letter of intent (LOI) in the United States.

Techopedia explains Memorandum of Understanding (MOU)

An MOU indicates that a legal contract will be forthcoming. This is more expeditious than other forms of documentation.

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.

MOUs can vary and be tailored to each organization’s or party’s needs. An MOU should state or describe:

Who the partners are and their contact information
What it is they are going to be working on, the background of the project and why the MOU is being entered into
The scope of the document and who will use what the MOU provides
Specified activities, if already determined
Implementation of activities
Funding issues
Each party's roles and responsibilities
A time line, if desired
Duration of agreement
A signature and date of signature by all of the parties agreeing to the MOU

MOUs can be useful documents to get the ball rolling on major projects and can be used in any type of organization.