Party 1 (Name), Party 1 (Address (one line)) ("Party 1 (Reference)")
and
Party 2 (Name), Party 2 (Address (one line)) ("Party 2 (Reference)")
each a "Party" and together the "Parties". This memorandum of understanding (the "MOU") takes effect on Effective date.
Background
Party 1 (Reference): Party 1 description
Party 2 (Reference): Party 2 description
The Parties want to record their shared understanding of a possible collaboration before they agree on final terms.
Purpose
The Parties intend to work together on the following: Purpose
The goal of the collaboration is: Goal
Contributions
Party 1 (Reference) intends to contribute: Party 1 contribution
Party 2 (Reference) intends to contribute: Party 2 contribution
Next steps
Next steps
The Parties will negotiate in good faith with the aim of signing a final written agreement that sets out the full terms of the collaboration. If the next steps include a pilot or test phase, the Parties will agree its scope, duration and costs in writing before it starts.
Legal effect
This MOU records the Parties' intentions only. It does not create a partnership, a joint venture, or any obligation to sign a final agreement or to carry out the collaboration. Either Party may end the discussions at any time without liability, except under the clauses that are binding.
Only the following clauses are legally binding: this clause, 5. (Confidentiality), 6. (Publicity), 7. (Costs), 8. (Exclusivity), 10. (Term and termination), 11. (Governing law and disputes) and 12. (General).
Confidentiality
Each Party will keep confidential all non-public information it receives from the other Party in connection with this MOU, including the existence and content of the discussions, and will use it only to evaluate and carry out the collaboration. A Party may share it with its employees and advisers who need it and are bound by similar confidentiality duties.
These duties do not apply to information that is or becomes public without a breach of this MOU, that the receiving Party already had or develops independently, or that it lawfully receives from a third party. A Party may disclose information where the law or a court requires it, and will inform the other Party first where this is allowed.
If one Party will process personal data on behalf of the other, the Parties will sign a data processing agreement before any personal data is shared.
These duties continue for Confidentiality period after this MOU ends. On request, each Party will return or delete the other Party's confidential information, except copies it must keep by law.
Publicity
Neither Party will announce the collaboration or use the other Party's name or logo without the other Party's prior written consent.
Costs
Each Party bears its own costs in connection with this MOU and the negotiation of a final agreement, unless the Parties agree otherwise in writing.
Exclusivity
While this MOU is in force, the Parties Exclusivity.
Intellectual property
Each Party keeps all rights in its own intellectual property. This MOU does not grant any license. The ownership and use of anything the Parties create together will be set out in the final agreement.
Term and termination
This MOU starts on the effective date and ends at the earliest of the following:
the Parties sign a final agreement on the collaboration;
MOU term after the effective date, if no final agreement has been signed by then; or
one Party gives the other Notice period written notice.
The confidentiality and publicity duties continue after this MOU ends, as set out above.
Governing law and disputes
This MOU is governed by the law of Governing law. The courts of Courts have jurisdiction over any dispute arising from it.
General
Neither Party is liable to the other for indirect or consequential loss arising from this MOU. This MOU is the Parties' complete understanding on its subject and can only be changed in writing signed by both Parties. Notices may be sent by email to the addresses the Parties use for signing. This MOU may be signed electronically and in counterparts.
Signed by the Parties:
Pending
Pending
Disclaimer: The original creator, the author of this template, and fynk GmbH are not responsible for any damages or liabilities that may result from using this template. This template should not be considered a substitute for legal advice, and consulting with a legal professional is recommended before use. fynk GmbH, the original creator, and the author do not provide legal advice and will not be held accountable for any legal consequences arising from its use.
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MOU meaning: the memorandum of understanding explained
What an MOU is, when it binds, how it differs from an LOI, MOA and contract, and how to fill in this non-binding MOU template with its binding protective clauses.
MOU (memorandum of understanding)
A bilateral (two parties) or multilateral (three or more) document that sets out the shared goals, roles and responsibilities of a planned partnership, project or program. Memorandum is Latin for “something to be remembered”. Businesses, universities, NGOs and governments use MOUs to agree on the outline of a collaboration before they commit to the details.
Use this template if:
You plan a partnership, pilot, research project or joint program with another organization
You want to agree on goals, roles and contributions before a detailed contract
The collaboration itself should stay non-binding
Confidentiality, publicity, costs and exclusivity should still bind both sides
What does MOU (memorandum of understanding) mean?
MOU stands for memorandum of understanding. You will also see it written as MoU, and the plural is memoranda (or memorandums) of understanding.
An MOU answers the questions the parties need settled before anyone invests serious time or money:
Who are the parties, and who signs for them?
What is the collaboration for?
What does each party contribute (money, people, expertise, IP, access)?
When does it start, and how long does it run?
Who pays for what?
What happens if the parties disagree or one of them wants out?
Which parts, if any, are legally binding?
It sits between a handshake and a contract. It is more formal and more specific than a conversation, but usually lighter than the definitive agreement that follows it.
Generally no, but the title does not decide it. Whether an MOU is binding depends on what it says and how the parties behave. Calling a document a “memorandum of understanding” does not stop a court from enforcing it.
Courts in common law countries ask two main questions:
Did the parties intend to be bound? Courts read the wording objectively. “The parties agree to” and “this MOU is legally binding” point one way. “This MOU is not intended to create legal obligations” points the other. In English law this is the test of intention to create legal relations.
Are the essential terms agreed and certain? If price, scope, contributions and timing are all settled, a court can treat the document as a complete agreement. If key terms are left “to be agreed”, it usually cannot.
Conduct matters too. Parties who start performing as if they have a deal can end up with one. In RTS Flexible Systems v Molkerei Alois Müller [2010] UKSC 14, the UK Supreme Court found a binding contract even though the draft was marked “subject to contract”, because the parties had started work and agreed the essential terms.
The best-known warning comes from the US. In Texaco v. Pennzoil, a Texas jury found in 1985 that a memorandum of agreement between Pennzoil and Getty Oil’s major shareholders had created a binding deal, and awarded Pennzoil $10.53 billion against Texaco for inducing Getty to walk away from it. The case is still taught as the reason to state clearly whether a preliminary document binds the parties.
Civil law systems take a similar line. In Germany, a non-binding Absichtserklärung creates no duty to sign the final deal, but a party that breaks off negotiations without good reason after creating firm trust can owe damages under culpa in contrahendo (§ 311(2) with § 241(2) and § 280 BGB).
Which MOU clauses are usually binding?
Even in an MOU that is otherwise non-binding, parties normally make a few clauses enforceable on purpose:
Decides where and how a dispute about the binding parts is heard
How to make the intent clear
Ambiguity is what gets MOUs into court. Pick one position and write it down.
Non-binding MOU, as in this template: “This MOU records the Parties’ intentions only. It does not create a partnership, a joint venture, or any obligation to sign a final agreement or to carry out the collaboration. Only the following clauses are legally binding: this clause, Confidentiality, Publicity, Costs, Exclusivity, Term and termination, Governing law and disputes, and General.”
Binding MOU, sample wording: “This MOU is legally binding and enforceable by either party.” Use this only when all essential terms are agreed, because a court will then treat the MOU as a contract.
Rules differ by country and by the type of counterparty. Have a lawyer in the relevant jurisdiction check any MOU that commits money, IP or exclusivity.
MOU vs contract vs LOI vs MOA
The four documents overlap, and people use the names loosely. What matters is the content, but the typical use of each looks like this:
MOU
Contract
Letter of intent (LOI)
Memorandum of agreement (MOA)
Main job
Record a shared understanding of how a collaboration will work
Create enforceable rights and obligations
Signal intent to do a specific deal and its headline terms
Record agreed terms in more detail than an MOU
Legally binding?
Usually not, unless drafted to be
Yes
Usually not, except selected clauses
Usually yes, or closer to binding than an MOU
Typical parties
Companies, universities, NGOs, public bodies, governments
Anyone with capacity to contract
Buyer and seller, investor and company
Public agencies, companies, schools
Level of detail
Purpose, roles, contributions, timeline
Complete terms
Price, structure, timeline, conditions
Roles, responsibilities, deliverables, funding
Typical use
Partnerships, research, public-private projects, international cooperation
Any commercial relationship
M&A, real estate, leases, large purchases
Inter-agency and partnership agreements with commitments
What follows
A definitive agreement, or nothing
Performance
A purchase or definitive agreement
Performance
MOU, MOA and LOI at a glance.
MOU vs LOI. An LOI is usually one party’s offer, or both parties’ outline, for a single transaction such as an acquisition or a lease. An MOU is usually about an ongoing relationship: how two organizations will work together. If you are preparing a purchase, start with a letter of intent.
MOU vs MOA. The terms are used interchangeably in many organizations, especially in the public sector and in the Philippines, where MOAs are common. As a rule of thumb, an MOA records commitments the parties expect to be held to (funding, deliverables, responsibilities), while an MOU records a shared intention. Read the document, not the label.
MOU vs contract. A contract needs offer, acceptance, consideration (in common law countries) and the intent to be bound. A non-binding MOU deliberately leaves out the last one. A binding MOU is in substance a contract. This template is not: only its protective clauses bind. The overview of types of contracts shows where an MOU fits among other agreements.
What to include in an MOU
Use this as a checklist. The right column shows where each element sits in this template.
Element
What to write
Section in this template
Parties
Full legal names and addresses
Opening block
Background
One line on what each party does
Background
Purpose and goal
What the collaboration is for and what it should achieve
Purpose
Contributions
Funding, staff, expertise, IP, facilities or access each party brings
Contributions
Next steps
What happens next, including any pilot or test phase
Next steps
Binding or not
A clear statement of legal effect and a list of binding clauses
Legal effect
Confidentiality and data
What is confidential, for how long, and a data processing agreement before personal data is shared
Confidentiality
Publicity
No announcements or logo use without consent
Publicity
Costs and exclusivity
Who pays for what, and whether talks with others are allowed
Costs, Exclusivity
Intellectual property
Each side keeps its own IP; joint results go into the final agreement
Which law applies and which courts decide disputes
Governing law and disputes
Signatures
Authorized signatory for each party
Signature blocks
Two things often missing from MOUs: an end date if no final agreement is signed (the template ends the MOU automatically after the term you choose) and clear confidentiality terms that keep applying after the MOU ends. Both prevent arguments later.
MOU examples by use case
Business partnership. Two companies agree to set up a jointly owned subsidiary. The MOU names the purpose, lists what each side contributes (funding and IP from one, production sites and distribution from the other), keeps the talks confidential and exclusive for a set period, and ends automatically if no joint venture agreement is signed by then. This is the scenario the template is built for. When the deal is agreed, the MOU is replaced by a joint venture agreement or a business partnership agreement.
Government and NGOs. A city and a nonprofit agree to run a housing program together. The MOU sets out who provides funding, who delivers services, how data is shared and how often they report. Public bodies use MOUs heavily, and some are binding: employers that join the US E-Verify program sign an MOU with the Department of Homeland Security and the Social Security Administration that sets the binding terms of participation.
Research. Two universities agree to run a joint research project and exchange PhD students. The MOU covers the research area, supervision, access to labs, publication rights and who owns the results. Detailed IP and funding terms usually follow in a separate research collaboration agreement.
International. Governments sign MOUs when they want to cooperate without concluding a treaty. The UK government’s treaty guidance describes an MOU as a record of commitments written to show that the participants do not intend it to be binding under international law. That is why intergovernmental MOUs avoid words like “shall” and “agree”.
How to write an MOU, step by step
Decide whether it is binding. Make this choice first, because it changes the wording of everything else. The template is non-binding with binding protective clauses, which suits most collaborations.
Identify the parties. Use full legal names and addresses. In fynk, your company is already filled in as Party 1.
State the purpose in one or two sentences. What will the collaboration achieve? If you cannot say it briefly, the parties are not aligned yet.
List each party’s contributions. Be concrete: amounts, headcount, licenses, equipment, deadlines. Vague contributions are the most common source of later disputes.
Describe the next steps. Set out what happens next. If you plan a pilot, agree its scope, duration and costs in writing before it starts.
Set the term and the exit. Add the start date, the notice period for termination and the date by which the definitive agreements must be signed.
Cover confidentiality and data. Choose how long confidentiality lasts after the MOU ends. For a separate, stand-alone agreement before the MOU, use a mutual NDA. If personal data will be shared, sign a data processing agreement first.
Choose governing law and courts. Name one law and one place of jurisdiction.
Check signing authority and sign. Each signatory must be authorized to bind their organization. Date the document and give every party a fully signed copy.
Signing an MOU
Even a non-binding MOU should be signed. The signatures show who agreed to what and when, and in many organizations a signed MOU is the trigger to release budget or start work. For a binding MOU, signatures by authorized representatives are what make the commitments enforceable.
An MOU can be signed electronically. In the US, the ESIGN Act and UETA give electronic signatures the same effect as handwritten ones for most business documents. In the EU, eIDAS says an electronic signature cannot be denied legal effect just because it is electronic, and a qualified electronic signature (QES) has the same effect as a handwritten one. With fynk you can fill in this template’s fields once, route it for internal approval, and send it to every party for e-signature. Signers do not need a fynk account, and the audit trail records who signed and when.
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MOU stands for memorandum of understanding: a written document in which two or more parties record the purpose, roles and contributions of a planned collaboration before, or instead of, signing a detailed contract.
Serious enough to treat with care. Even a non-binding MOU signals commitment, can be cited in later negotiations, and may contain binding clauses. If the wording is ambiguous, a court may decide it is a contract.
An MOU usually records a shared intention and is often non-binding. An MOA (memorandum of agreement) usually records specific commitments, such as funding and deliverables, that the parties expect to be held to. Many organizations use the terms loosely, so read the legal effect clause rather than the title.
A letter of intent usually concerns one transaction, such as an acquisition or a lease, and sets out its headline terms. An MOU usually concerns an ongoing collaboration and sets out how the parties will work together. Both are usually non-binding, with selected binding clauses.
Only if the parties intended it to be and its essential terms are certain. English courts test intention objectively from the wording and the parties’ conduct. Saying expressly that the MOU is not legally binding, or that it is subject to contract, normally prevents it from binding the parties, although conduct can still create a contract.
No. An MOU does not need a notary or witnesses in most countries. It needs the signatures of people authorized to sign for each party. Notarization is only needed if a specific law or one of the parties requires it, for example for some filings abroad.
As long as the MOU says. This template ends when the parties sign a final agreement, when the term you choose runs out, or when either party gives written notice, whichever comes first. Confidentiality continues for the period you set.
Yes. Electronic signatures are valid for MOUs in most jurisdictions, including under the ESIGN Act and UETA in the US and eIDAS in the EU. Make sure each signer is authorized to bind their organization.
Another name for a memorandum of understanding. A document, statement or letter of understanding records what two or more parties intend to do together before they sign a binding contract. This MOU template works as a sample for any of them.
