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A memorandum of understanding is a document that describes the broad outlines of an agreement that two or more parties have reached. MOUs communicate the mutually accepted expectations of all of the parties involved in a negotiation. While not legally binding, the MOU signals that a binding contract is imminent.
Accordingly, an MOU can serve as a definitive agreement where the parties have moved beyond the preliminary stages of the contract and it is clear from the wording of the MOU that the parties intend it to be the full and final documentation, enforceable by and against them, in accordance with its terms.
Primarily, what must be understood is that an MOU is non-binding and legally non-enforceable and is only an “agreement to agree” and highlights business relationships, which, are likely to result in some contract or any formal agreement between the parties.
If it’s not legally binding, either party can terminate a memorandum of understanding by notifying the other party. Generally, in this scenario, neither party will be subject to any legal liabilities or obligations.