Memorandum of Understanding (MOU) Template: Binding vs Non-Binding
A memorandum of understanding (MOU) is a written record of what two or more parties intend to do together, usually before or instead of a full contract. Whether an MOU is legally binding depends on its wording and the parties' conduct, not on its title. Below: what an MOU is, how it differs from a contract and a letter of intent, how to make it clearly non-binding (or binding), a free sample you can copy into Word, and common mistakes.
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Install free in WordLast checked: 22 October 2026. This page is general information about United States practice, not legal advice. Whether a preliminary agreement is enforceable is a question of state law and the facts. Have a lawyer licensed in the relevant state review an MOU before you sign it, especially if money, exclusivity or confidential information is involved.
What a memorandum of understanding is
An MOU sets out the shared understanding of the parties: the purpose of the relationship, what each party expects to contribute, the main terms they have agreed so far, and the next steps. It is common for business partnerships and joint projects before a definitive agreement, collaborations between nonprofits, universities or research groups, referral and co-marketing arrangements, and arrangements between government agencies.
The title does not decide its legal effect. A document called an MOU can be an enforceable contract if it shows an intent to be bound and covers the essential terms, and a document called an "agreement" can be unenforceable if it is only an agreement to agree. The safest approach is to say expressly which parts bind the parties and which do not.
MOU vs letter of intent vs contract
| Document | Typical purpose | Usually binding? |
|---|---|---|
| Memorandum of understanding (MOU) | Records shared goals, roles and agreed principles for a relationship or project. | Often non-binding on the main terms, with a few binding clauses. Depends on the wording. |
| Letter of intent (LOI) or term sheet | Outlines the key terms of a specific deal, such as an acquisition or lease, before final documents. | Usually non-binding on deal terms, with binding confidentiality, exclusivity and costs clauses. See our letter of intent template. |
| Contract (definitive agreement) | Sets out enforceable rights and obligations. | Yes, if the elements of a contract are present. |
Is an MOU legally binding?
It can be. US courts generally ask whether the parties intended to be bound, judged from the document and the circumstances. Factors courts commonly weigh include:
- The language. Words such as "non-binding", "subject to a definitive agreement" or "no obligation until signed" point away from a contract; "agree", "shall" and "will" point toward one.
- Whether the essential terms are agreed. If price, scope or other key terms are left open, a court is less likely to find a contract.
- Whether a formal agreement was expected. A clear statement that the parties will not be bound until they sign a definitive agreement is strong evidence.
- Conduct and part performance. If the parties start performing as if bound, that can support enforceability.
- The kind of deal. Complex or high-value transactions are more often expected to be put in a full written agreement.
Some courts also recognize a middle category: a binding agreement to negotiate the open terms in good faith, without a binding agreement on the deal itself. A frequently cited example is Teachers Insurance & Annuity Ass'n v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987), applying New York law. In Delaware, SIGA Technologies, Inc. v. PharmAthene, Inc., 67 A.3d 330 (Del. 2013), held that a party that breached an express obligation to negotiate in good faith could, in the circumstances of that case, be liable for expectation damages. If you do not want any duty to negotiate, say so.
Binding vs non-binding MOU at a glance
| Non-binding MOU | Binding MOU | |
|---|---|---|
| Main commercial terms | Statement of intent only; no obligation to complete the deal. | Enforceable obligations, so the terms must be definite. |
| Key wording | "Non-binding", "subject to a definitive agreement", "either party may end discussions at any time". | "The parties agree", clear obligations, consideration, signatures by authorized signers. |
| Binding clauses commonly included anyway | Confidentiality, exclusivity (if any), costs, governing law, no-obligation statement, termination. | All terms bind. |
| Main risk | Conduct or loose wording turns it into a contract anyway. | Missing essential terms make it unenforceable or lead to a dispute about what was agreed. |
Key clauses in a memorandum of understanding
- Parties. Full legal names and the authorized signer for each.
- Purpose and background. What the parties want to achieve together.
- Roles and contributions. What each party expects to do or provide: staff, funding, facilities, data, introductions.
- Principal terms. The terms agreed in principle so far, such as revenue sharing, cost sharing or intellectual property.
- Next steps and timeline. Due diligence, the target date for a definitive agreement, and who drafts it.
- Binding effect. A clear clause saying which sections bind the parties and that everything else does not.
- Confidentiality. Usually binding, or a reference to an existing NDA.
- Exclusivity. If one party agrees not to negotiate with others for a period, say so, state the period, and make it binding.
- Costs. Each party usually bears its own costs.
- Term and termination. When the MOU ends, for example on signing a definitive agreement, on a set date, or on notice by either party.
- Governing law and signatures. The state whose law applies to the binding clauses, and the signature blocks.
Free memorandum of understanding template (sample text)
Copy the text below into Word and fill in the brackets. It is an original, general US sample of a non-binding MOU with a short list of binding clauses. It is a starting point, not a finished document. If you want the whole MOU to be binding, it needs definite terms and should be drafted as a contract instead; ask a lawyer.
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is entered into as of [date] by [PARTY A LEGAL NAME], a [state] [entity type], of [address] ("[Party A short name]"), and [PARTY B LEGAL NAME], a [state] [entity type], of [address] ("[Party B short name]") (each a "Party").
1. Purpose. The Parties wish to explore [describe the proposed collaboration, project or transaction] (the "Proposed Collaboration"). This MOU records their current understanding of its main terms and the steps toward a definitive agreement.
2. Proposed roles. The Parties currently expect that (a) [Party A] would [contributions and responsibilities]; and (b) [Party B] would [contributions and responsibilities].
3. Principal terms. The Parties currently expect the definitive agreement to include the following terms: [costs and revenue sharing]; [ownership and licensing of intellectual property]; [term of the collaboration]; [other key terms].
4. Next steps. The Parties intend to [complete due diligence / prepare a project plan] and to negotiate a definitive agreement, with a target signing date of [date]. [Party] will prepare the first draft.
5. Confidentiality. (Binding) Each Party will keep confidential, and use only to evaluate the Proposed Collaboration, any non-public information the other Party discloses in connection with it, except information that is or becomes public through no fault of the recipient, was already known to it without restriction, is independently developed, or is lawfully received from a third party without restriction, and except as required by law. [Alternatively: The Mutual Nondisclosure Agreement between the Parties dated [date] governs information exchanged under this MOU.] This section continues for [two] years after this MOU ends.
6. Exclusivity. (Optional; binding if included) Until [date] or the earlier termination of this MOU, [Party] will not [negotiate / enter into an agreement] with any third party for [describe the same or a substantially similar collaboration].
7. Costs. (Binding) Each Party will bear its own costs and expenses relating to this MOU and the Proposed Collaboration, unless the Parties agree otherwise in writing.
8. Term and termination. (Binding) This MOU ends on the earliest of (a) the signing of a definitive agreement, (b) [date], or (c) [10] days after either Party gives written notice to the other that it is ending discussions. Sections 5, 7, 9, 10 and 11 survive termination. Section 6, if included, ends on the date stated in that section or the earlier termination of this MOU.
9. Non-binding effect. (Binding) Except for Sections 5 through 11 (the "Binding Provisions"), this MOU is a statement of intent only. It does not create any legally binding obligation, including any obligation to negotiate, to continue negotiating, or to enter into a definitive agreement or the Proposed Collaboration. No such obligation will exist unless and until the Parties sign a definitive written agreement. Either Party may end discussions at any time for any reason, subject only to the Binding Provisions. Neither Party will have any liability to the other because negotiations end or because a definitive agreement is not signed, except for breach of the Binding Provisions.
10. No agency. Nothing in this MOU creates a partnership, joint venture, agency or employment relationship, and neither Party may bind the other.
11. Governing law; counterparts. The Binding Provisions are governed by the laws of the State of [state]. This MOU may be signed in counterparts and by electronic signature.
[PARTY A LEGAL NAME] By: ____________________ Name/Title: [__________] Date: [______]
[PARTY B LEGAL NAME] By: ____________________ Name/Title: [__________] Date: [______]
Not legal advice. This sample is not tailored to any state or transaction. Government agencies, universities and regulated bodies often have their own required MOU forms and signing authority rules; check them first.
Common mistakes in MOUs
- Saying nothing about binding effect. Without a clear clause, the parties may later disagree about whether they made a contract.
- Mixed signals. A "non-binding" label next to many "shall" obligations, detailed payment terms and signatures can still be argued to be binding. Keep the language of intent consistent.
- Acting as if the deal is done. Starting work, paying money or announcing the deal can support an argument that the parties intended to be bound.
- Forgetting the clauses that should bind. Confidentiality, exclusivity and costs are often the only parts that matter if talks fail, so make them clearly binding.
- Exclusivity without an end date. Always state the period and when it ends.
- Accidentally agreeing to negotiate in good faith. If you do not want that duty, say expressly that there is no obligation to negotiate.
- The wrong signer. Make sure the person signing has authority, especially for public bodies and universities.
How to draft or review an MOU in Word with LexDraft
LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the MOU stays in the document you are already editing.
Describe the arrangement
Open LexDraft in Word and describe the collaboration in plain English: the parties, what each will contribute, which terms should be binding, and the governing state. LexDraft asks a few clarifying questions, then writes a first draft into your document as editable Word text.
Review it against the governing law
To review an MOU you drafted, or one the other side sent, pick the governing state and run a review. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated MOU playbook, so this runs as a general review. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
Check and accept the redlines
Run the defined-term and cross-reference checks, which are rule-based and run without AI. The cross-reference check can flag a supported reference such as "Section 12" when its target heading is missing from the open document. Check the Binding Provisions list yourself to confirm it names the intended clauses. Accept or reject each proposed redline; accepted changes land as native Word tracked changes.
What LexDraft does not do: it does not give legal advice or decide whether a document is binding. You check every output before anyone signs.
Frequently Asked Questions About MOUs
What is a memorandum of understanding (MOU)?
A memorandum of understanding is a written record of what two or more parties intend to do together: the purpose of the relationship, each party's expected role, the terms agreed in principle and the next steps. It is often used before a definitive agreement, or for collaborations where the parties do not want a full contract.
Is an MOU legally binding?
It depends on the wording and the circumstances, not the title. US courts generally ask whether the parties intended to be bound and whether the essential terms were agreed. Many MOUs are non-binding statements of intent with a few binding clauses, such as confidentiality, costs and governing law. An MOU that shows an intent to be bound and covers the essential terms can be an enforceable contract.
How do I make an MOU non-binding?
Say so clearly. Include a clause stating that the MOU is a statement of intent only, that no party is obliged to negotiate or to complete the transaction until a definitive written agreement is signed, and that either party may end discussions at any time. List the sections that are binding, such as confidentiality, exclusivity and costs. Keep the rest of the language consistent with that intent, and avoid acting as though the deal is already agreed.
What is the difference between an MOU and a letter of intent?
The two overlap and the labels are not legal categories. A letter of intent or term sheet usually outlines the key terms of a specific deal, such as an acquisition or a lease, before final documents are drafted. An MOU is more often used to record a broader relationship or collaboration. Both are often non-binding on the main terms with some binding clauses.
What is the difference between an MOU and a contract?
A contract creates enforceable obligations. An MOU may or may not: it is a contract only if it meets the requirements of one, including the parties' intent to be bound and sufficiently definite terms. If you want enforceable obligations, draft a contract rather than relying on an MOU.
Can an agreement to negotiate in good faith be binding?
In some states, yes. Some courts recognize a binding preliminary agreement to negotiate open terms in good faith, even when the deal itself is not binding. A frequently cited New York-law example is Teachers Insurance & Annuity Ass'n v. Tribune Co. (S.D.N.Y. 1987). If you do not want any duty to negotiate, say so expressly.
Does an MOU need to be signed or notarized?
Signatures by authorized representatives are customary and help show what was agreed. Notarization is generally not required. Government agencies, universities and other public bodies often have their own signing authority rules and required MOU forms, so check those first.
Can I use a free MOU template?
Yes, as a starting point. Decide first whether the MOU should be binding, then fill in every bracket and make the binding-effect clause match your intent. Have a lawyer licensed in the relevant state review it if money, exclusivity, intellectual property or confidential information is involved.
Moving from an MOU to a definitive agreement?
Draft and review MOUs in Word
Describe the arrangement, get a first draft in your document, then review it with tracked-change redlines. You stay in Word, and you decide what changes.
Install LexDraft for WordThis page is general information, not legal advice. LexDraft does not give legal advice; review every draft with qualified counsel licensed in the relevant state. Spotted something out of date? Email support@lexdraft.ai and we will fix it.