Have you ever wondered what you can do to make parts of your agreement more official before signing a final contract? Many reasons could delay an official contract, but it would be much better to have some understanding in place beforehand.That's when a Memorandum of Understanding might be helpful. You can use it to outline the general details of your future collaboration. You can include anything you consider essential. The best thing about a Memorandum of Understanding is that it's not legally binding, and you don't have to stick to it if circumstances change.
What Is a Memorandum of Understanding?
A Memorandum of Understanding is a nonbinding agreement between two parties outlining the terms and details of a future collaboration or transaction. A Memorandum of Understanding can be used as a base for a future contract, although you don't strictly follow it.
Big companies and international organizations usually use a Memorandum of Understanding as a first step toward signing the official contract.
It's important to note that some parts of a Memorandum of Understanding can be legally binding. For example, if your memorandum contains a non-disclosure clause or any similar clause regarding privacy, they could be legally binding.
If you want to make sure your Memorandum of Understanding is not legally binding in any part, you can do so by including a statement confirming the fact.
Other Names for Memorandum of Understanding
Depending on your state, a Memorandum of Understanding may also be known as:
- Memoranda of Understanding
- Memorandum of Agreement
- Joint Declaration of Intent
- Gentlemen's Agreement
- Letter of Intent
While some states use all these terms to indicate a Memorandum of Understanding, other countries distinguish them. You can find a thorough explanation in the FAQ section, but we suggest that you double-check your particular state.
Who Needs a Memorandum of Understanding
If you're planning a partnership, collaboration, or transactions with a new business partner, a Memorandum of Understanding may be the right thing for you. It allows you to outline details of a future transaction, contract, or collaboration.
A Memorandum of Understanding can be helpful when you know you won't be able to sign a contract soon, but you need some confirmation of your plans. Moreover, it can help you come to terms with your business partner and solve potential misunderstandings early on.
You might wonder how this nonbinding document could help you when both parties can cancel it at any time. Although a Memorandum of Understanding may not offer a high-security level, it can save you much time creating the final contract. You already have the essential terms outlined.
Why Use 360 Legal Forms for Your Memorandum of Understanding
Customized for you, by you
Create your own documents by answering our easy-to-understand questionnaires to get exactly what you need out of your Memorandum of Understanding.
Specific to Your Jurisdiction
Laws vary by location. Each document on 360 Legal Forms is customized for your state.
Fast and easy
All you have to do is fill out a simple questionnaire, print, and sign. No printer? No worries. You and other parties can even sign online.
How to Create a Memorandum of Understanding with 360 Legal Forms
On our website, you can find multiple 360 Legal Forms templates to help you create a suitable Memorandum of Understanding for your particular situation. Fill it out with details of all parties, and add any additional terms you want to include. After that, click on the Download button and get your Memorandum of Understanding as a PDF or a Word document, or print it instantly.
What Information Will I Need to Create My Memorandum of Understanding
To create your document, please provide:
- Effective Date: Include the date when a memorandum is designed and signed.
- The Parties Involved: Names, details, and contact information of all parties signing a memorandum.
- Details of Transaction: Explain the details of planned transactions, such as which party is buying and which party is selling.
- The Transaction Amount: Specify the amount of money that one of the parties will pay (if you don't know the exact amount yet, you can omit this information (it's not obligatory).
- Expected Closing Date: When do you believe the transaction will be completed.
- Additional Terms: You can add any other terms explaining the transaction's nature or your business relation. Some of the clauses you can include are warranty, liability, or terms of delivery.
- Signature: All parties that participate have to sign the document; otherwise, it won't be valid.
Memorandum of Understanding Terms
- Bilateral Memorandum of Understanding: A Memorandum of Understanding in which only two parties participate: you and one more person.
- Multilateral Memorandum of Understanding: A Memorandum of Understanding in which more than two parties participate.
- A Nonbinding Agreement: It means that this document can't be legally enforced or used against you or the other party.
Memorandum of Understanding Signing Requirements
As a nonbinding agreement, a Memorandum of Understanding doesn't have to be notarized. However, you may want to include your lawyer in the process, to help you create the final version. This can be very helpful, especially if you plan to hire the same lawyer to help you with making the final contract.
What to Do with Your Memorandum of Understanding
Each party signing a Memorandum of Understanding should obtain a copy of the document. Although you can't do a lot with a memorandum before the real contract, you should take good care of it as you could use it later as a base for the contract.
