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