What is a Memorandum of Understanding?
A Memorandum of Understanding, also known as a Letter of Intent, is a non-binding document that summarises the results of negotiations between two parties in order to facilitate the future formation of a contract.
A Memorandum of Understanding, also known as a Letter of Intent, is useful when parties are not ready to sign a contract but want to record the progress of initial negotiations and issues that need resolution. It contains information such as the main content of the future contract and the time when the contract will be signed.
A Memorandum of Understanding, also known as a Letter of Intent, may also contain details about how further negotiations should be conducted and any exclusivity period during which the parties are precluded from negotiating with other parties, and has the effect of pushing forward contract negotiations.
Key points included
- Name of the proposed agreement;
- Pricing, conditions, and payment deadlines of the proposed agreement, if any;
- Obligations of each party;
- Date for signing of proposed agreement; and
- Date of Memorandum of Understanding.