Free US Law Dictionary

Memorandum of Understanding

A Memorandum of Understanding (MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It most often is used in cases where parties do not intend to imply a legal commitment. It is a more formal alternative to a gentlemen's agreement. However, in some cases, depending on the exact wording, MoUs can have the binding power of a contract. It is important to note that, as a matter of well-established law, a contract does not have to be labeled "contract," to be legally binding; it could be labeled "Christmas Carol" (pick your whimsy) and still be enforceable in a court of law. Whether or not a document constitutes a binding contract depends only on the presence or absence of well-defined legal elements in the text proper of the document (the so-called "four corners"). For example, a binding contract typically must contain mutual consideration - a legally enforceable obligations of the parties, and its formation must take place free of the so-called real defenses to contract formation (fraud, duress, lack of age or mental capacity, etc.). Be advised, therefore, that a document titled "Memorandum of Understanding" can constitute a legally binding contract, depending on e.g. the wording and general intent of the parties.