Memorandum of Understanding

A contractual agreement in which two parties, a client and service provider, agree to terms and conditions that are to govern all transactions between them for the long-term.

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What is an MoU?

A Memorandum of Understanding (MoU) is a document in which two or more parties declare that they agree on a common course of action or business. It is the first stage of the making of a contract. An MoU is generally recognised as binding even though it creates no rights and obligations in itself. To be legally operative, an MoU must identify the contracting parties, spell out the subject matter of the agreement and its objectives, summarise the essential terms and must be signed by the contracting parties.

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Advantage

1

Covers Entire Relationship The Master Service Agreement covers the entire relationship between service provider and customer, covering all aspects of the contract that are likely to arise. Such an agreement is beneficial to have in place before starting a long-term relationship with a vendor/customer.

2

Saves Time It provides a framework to quickly negotiate agreements. Therefore, the same terms need not be repetitively negotiated for deals that are very similar to each other.

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FAQ

A Memorandum of Understanding (MOU) is a formal agreement between two or more parties. Companies and organizations can use MOUs to establish official partnerships.

An MOU helps the parties to clear the arrangements so as to speed up the process of negotiation in relation to the agreement. It is not intended to be a legally binding document. If you want a legally binding document then an MOU is not appropriate.

Agreement is any document which is enforceable by Law. You can have substantial rights in Agreement and not in MOU. MOU is a legal document describing a bilateral agreement between parties.

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