A memorandum of understanding (MOU) is a non-binding agreement between two parties that sets forth the key terms of a potential, soon to follow binding agreement. For instance, if one business intends to collaborate with another business, the parties may wish to first make sure they are at least generally on the same page before significant amounts of time and legal fees are spent on preparing a more detailed binding agreement. A MOU is an effective way to achieve this.
Ideally, the MOU would mostly discuss only the high level terms of the collaboration. For instance, the MOU should outline who will be involved, what each party’s primary responsibilities are, the timeline for entering into a binding agreement, and other key information. The MOU should also be clear that it is a non-binding agreement.
Once the parties have agreed on the content of the MOU, the MOU can then be executed by the parties. With the high level terms of the collaboration already thought through, the parties can then begin to focus on the remaining details of the deal with greater confidence that a binding agreement will ultimately be reached.
As you can see, a MOU can be a valuable tool. For assistance in drafting or reviewing a MOU, please contact any BrownWinick attorney.