Memoranda of Understanding
This page is to help Victorian community organisations to understand the main circumstances when a Memorandum of Understanding (MOU) may be suitable to document an agreement between two organisations.
The information on this website is intended as a guide only, and is not legal advice. If you or your organisation has a specific legal issue, you should seek advice before making a decision about what to do.
What is a Memorandum of Understanding (MOU)?
A MOU is generally considered ‘an agreement to agree’ or an agreement to enter into a more specific and comprehensive contract or agreement at a later time after further negotiations.
An MOU will typically establish a framework for the collaboration between the organisations and express the common goals or vision of the parties to the MOU. In general, an MOU will not deal with the specific details of particular projects. An MOU is therefore usually more of a 'high level' agreement.
When should an MOU be used?
A MOU will typically be used in the not-for-profit sector when organisations wish to co-operate and/or share information with each other, allowing each to make the most of the other's specialist skills or knowledge.
For example, XYZ is a not-for-profit organisation that is set up to help sufferers of a particular disease and their carers. XYZ set up a website about the disease. They are aware of a hospital that has a specialist centre which has published a lot of research about the disease. XYZ approach the hospital about their work. The two organisations agree to promote each other’s work on their respective websites and to work towards co-hosting an international researcher to visit. To formalise the relationship, the two organisations write and sign a MOU.
In general, an MOU is not a legally binding document (see further below) so it is not appropriate to use an MOU if your organisation wants to be able to enforce a part of the agreement. If you need to rely on the other organisation taking certain actions and / or if your organisation stands to lose money if the other party doesn’t act, then an MOU is not appropriate – your organisation should enter into a contractual arrangement.
What issues will an MOU cover?
This will depend on the nature of the collaboration you want with another organisation. Typically an MOU document may set out:
- details of the organisations entering into the MOU;
- objectives of the arrangement and goals or expected benefits;
- agreed actions, services areas of support;
- strategies and mechanisms for dealing with common issues;
- the term of the MOU (an agreed start and review date);
- the agreed roles of each organisation;
- the naming of a position in each organisation as a central point of contact for the MOU; and
- a communication plan or dispute resolution statement.
What are my obligations under a MOU?
Your obligations under the MOU will be outlined in the document and may include obligations to:
- share information (which may or may not include confidential information);
- work in co-operation with the other party on particular types of projects;
- actively promote events/activities of the other party;
- refer clients to the other party; and
- jointly host events/seminars/workshops.
Is a MOU a legally binding document – like a contract?
Generally, MOUs are expressed to be not contractually binding, and are more a statement of intent or an 'agreement to agree'. This is because the courts will generally not recognise agreements to enter into contracts, as contracts in their own right. However, whether an MOU is binding or not will be highly dependant on the terms of the MOU (that is, on what is set out in writing).
If an MOU is quite detailed and includes a number of important terms (for example, about the exchange of money) it may well be considered a contract in its own right. If the MOU is relatively high level and leaves the specifics of particular projects or arrangements for later negotiation between the parties, it is unlikely to be enforceable as a contract against either party.
To help avoid any uncertainty about whether a MOU is legally binding, your organisation should make sure the MOU contains a specific statement to the effect that it is not intended to create legally binding.
If your organisation wants to enter into an arrangement that is legally binding on the other party, an MOU is not a suitable arrangement. Your organisation should consider entering into a contract with the other party.
Related Resources
Related links - VCOSS Link