What is a Memorandum of Understanding (MoU)?

A memorandum of understanding (MOU) is a written agreement between two or more parties that outlines the terms and objectives of a proposed partnership or collaboration. It's a non-binding agreement that sets out the basic principles and expectations for the working relationship between the parties involved. The purpose of an MOU is to ensure that everyone involved has a clear understanding of the goals and objectives of the project, as well as the responsibilities of each party.

An MOU can be used in a variety of settings, including business, government, and non-profit organizations. For example, two companies may sign an MOU to explore the possibility of working together on a new product. A government agency may sign an MOU with a non-profit organization to collaborate on a community development project.

While an MOU is not legally binding, it serves as a valuable tool for establishing a common understanding and can provide a framework for further negotiations or contracts. It can also help to avoid misunderstandings and disputes down the line by setting out the expectations and responsibilities of each party.

It's important to note that an MOU is not the same as a contract. A contract is a legally binding agreement that is enforceable in a court of law, while an MOU is a preliminary agreement that does not have the same level of legal force. An MOU is often used as a precursor to a contract, serving as a starting point for negotiations and discussions between the parties involved.

Simplified Example

Imagine you and a friend want to start a lemonade stand together. You both have different ideas about what flavors to sell and how to run the business. Before you start making any decisions, you both write down your ideas and agree on the important parts of the lemonade stand. This written agreement is like a memorandum of understanding. It helps make sure both you and your friend are on the same page and helps prevent any confusion or misunderstandings later on.

History of the Term "Memorandum of Understanding (MOU)"

The term "memorandum of understanding (MOU)" is thought to have originated in the mid-20th century, aligning with the growth of international relations and diplomacy. While the precise origins remain unclear, it is believed that the term came into use during a period when agreements between parties started to shift towards a more formalized and standardized format. Before this development, agreements were often more informal, lacking a consistent structure.


A memorandum of understanding (MoU) between two companies to collaborate on a research project.

An MoU between a government agency and a non-profit organization to provide funding for community programs.

An MoU between two universities to establish a student exchange program and to conduct joint research projects.

  • Contract: A self-executing agreement that is recorded on a blockchain.

  • Mining Contract: An agreement between a cryptocurrency miner and a customer who wants to mine cryptocurrency but does not have the necessary equipment or technical expertise to do so.