A memorandum of understanding is an agreement between two or more parties outlined in a formal document. It is not necessarily legally binding, which depends on the signatories' intent and the language in the agreement, but signals the willingness of the parties to move forward with a contract.
The MOU can be seen as the starting point for negotiations as it defines the scope and purpose of the talks. Such memoranda are most often seen in international treaty negotiations but may also be used in high-stakes business dealings such as merger talks.
An MOU is an expression of agreement to proceed. It indicates that the parties have reached an understanding and are moving forward. Although it is not always legally binding, it is a serious declaration that a contract is imminent. NOTE:- Although an MOU is not necessarily legally binding, it allows parties to prepare for signing a contract by explaining the broad concepts and expectations of their agreement. Communicating in clear terms what each party hopes to gain from an agreement can be essential to the smooth execution of signing a legal contract in the future.
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