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What Is a Memorandum of Understanding (MOU)?

A memorandum of understanding (MOU or MoU) is an agreement between two or more parties outlined in a formal document. It is not legally binding but signals the willingness of the parties to move forward with a contract.

The MOU can be seen as the starting point for negotiations as it defines the scope and purpose of the talks. Such memoranda are most often seen in international treaty negotiationsbut also may be used in high-stakes business dealings such as merger talks

How an MOU Works?

 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 the parties involved in a negotiation.

 While not legally binding, the MOU signals that a binding contract is imminent.

 The MOU is most often found in international relations.

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