“Think of an MOU as someone taking notes while hashing out the details before entering into a contract,” Benarroche says. “They can expedite the start of the work, which is helpful when dealing with entities that have a complicated contract process.” “MOUs are often used to get a construction project started when contract negotiations are expected to take a while,” says Alex Benarroche, a construction lawyer based in Louisiana. It also helps resolve conflicts that might occur before the formal contract is signed. It helps the parties understand what the most important terms and conditions are for the other side and helps them come to an agreement.
The memo serves as a starting point for contract negotiations, defining the scope and purpose of the relationship.Īn MOU is less formal than a contract and doesn’t contain all the terms of the agreement between the parties. What is a memorandum of understanding (MOU)?Ī memorandum of understanding (MOU), often called a letter of intent or notice to proceed, is a nonbinding agreement between two parties that signals their intent to enter into a contract.
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Download a free construction MOU template.What to include in a memorandum of understanding.
What is a memorandum of understanding (MOU)?.
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