How Is a Memorandum of Understanding Different from a Contract

When it comes to legal agreements, there are different types that organizations and individuals use to formalize their relationships. Two of the most common types of legal agreements are the memorandum of understanding (MOU) and the contract.

While an MOU and a contract might appear to be the same, they are actually quite different from one another. Understanding these differences can help you determine which type of legal agreement you need for a particular circumstance.

Here are the key differences between MOUs and contracts:

Nature of the Agreement

An MOU is an agreement between two parties that outlines the basic terms that they have agreed to. MOUs are generally used when two parties want to work together on a project or activity, but they don`t want to enter into a fully binding agreement just yet. MOUs are usually less formal than contracts and may not contain as many details.

On the other hand, a contract is a legally binding agreement between two or more parties that outlines the terms and conditions of their relationship. Contracts are used when parties want to spell out their obligations and responsibilities in more detail and want assurance that the other party will fulfill their obligations.

Scope of the Agreement

MOUs are usually used for broad, general agreements that do not go into specific details. They can be used to outline the parties` objectives, goals, and expectations without getting into the minutiae of how those goals will be achieved.

Contracts, on the other hand, are more specific and detailed. They contain specific terms and conditions that spell out the parties` obligations and responsibilities. Contracts also identify the consequences of breaching the agreement and provide remedies for any disputes that may arise.

Legal Status

While both MOUs and contracts are legally binding, they have different levels of enforceability. MOUs are generally not as enforceable as contracts because they lack the specificity and detail that contracts have. MOUs are often used as a pre-contractual document, meaning that they can be used to lay the groundwork for a formal contract that will be enforced in court.

Contracts, on the other hand, are highly enforceable. If one party breaches the terms of a contract, the other party can take legal action to hold them accountable.


In summary, an MOU is a less formal agreement that outlines the basic terms of a relationship between two parties. It is usually used as a precursor to a formal contract. A contract, on the other hand, is a more detailed and specific agreement that outlines the obligations and responsibilities of the parties involved.

When deciding which type of legal agreement to use, consider the level of detail and specificity needed in the agreement, as well as the enforceability of the agreement in court. By understanding the key differences between MOUs and contracts, you can make an informed decision on which agreement to use for your particular circumstance.