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Agreement vs. Memorandum of Understanding: Know the Difference

Shumaila Saeed
By Shumaila Saeed || Published on January 18, 2024
An Agreement is a formal, legally binding contract, while a Memorandum of Understanding (MoU) is generally a non-binding understanding between parties.
Agreement vs. Memorandum of Understanding

Key Differences

An Agreement is a formal arrangement between parties that is legally enforceable. It often involves exchange of goods, services, or other considerations. A Memorandum of Understanding (MoU), however, is more of a formal handshake; it outlines an agreement but is typically not legally binding. It serves to express a convergence of will between the parties, indicating an intended common line of action.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024
Agreements require elements like offer, acceptance, and consideration to be legally binding. They are often used in business dealings, contracts, and legal situations. A MoU, in contrast, is used to signify a mutual understanding and sets the foundation for a future agreement. It is commonly used in diplomatic and international relations as a preliminary to a formal agreement.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024
In an Agreement, the terms are clearly defined and legally enforceable. This includes penalties for non-compliance. MoUs are more flexible, outlining intentions and interests without delving into detailed legal terms. MoUs are often used when parties do not want to impose legal obligations but still want to show commitment.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024
The enforceability of an Agreement is its key characteristic; it can be upheld in a court of law. MoUs, however, are not typically enforceable. They are more about mutual respect and understanding, used to document an intention to explore a partnership or collaboration.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024
Agreements are used when parties want a definite, clear, and binding outcome. This could include employment contracts, lease agreements, or service contracts. MoUs are preferred when parties are not ready or do not wish to enter into legally binding commitments but want to document their intentions or preliminary understandings.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024
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Comparison Chart

Legal Status

Legally binding
Typically not legally binding
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Jan 18, 2024

Purpose

Formalize enforceable obligations
Express mutual intentions or plans
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Use in Business

Common for contracts, transactions
Often used in initial stages of negotiation
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Detail and Specificity

Detailed terms and conditions
Broad outline of intentions or interests
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Enforceability in Court

Enforceable
Generally not enforceable
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Agreement and Memorandum of Understanding Definitions

Agreement

A legally binding contract specifying terms and conditions.
They entered into a rental agreement for the apartment.
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Jan 05, 2024

Memorandum of Understanding

A document expressing mutual consensus and intent to work together.
An MoU was signed to initiate joint research in renewable energy.
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Agreement

A mutual arrangement between two or more parties that is enforceable by law.
The company signed an agreement to purchase 100 units of the product.
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Memorandum of Understanding

A written outline of a mutual understanding, often preceding a formal agreement.
The two companies signed an MoU as a precursor to a joint venture.
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Jan 05, 2024

Agreement

The act of agreeing
When did the agreement take place?.
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Memorandum of Understanding

A preliminary agreement indicating a willingness to negotiate in good faith.
The MoU marked the beginning of talks for a potential partnership.
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Agreement

Harmony of opinion; accord
Since we are all in agreement, let's proceed.
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Jan 05, 2024

Memorandum of Understanding

A non-binding agreement between parties outlining a course of action.
The universities signed an MoU to explore student exchange programs.
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Agreement

An arrangement between parties, usually resulting from a discussion, regarding a course of action.
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Shumaila Saeed
Jan 05, 2024

Memorandum of Understanding

An informal agreement documenting the parties' intentions to cooperate.
They drafted an MoU to outline the terms of their collaboration.
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Agreement

A properly executed and legally binding contract.
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Agreement

The writing or document embodying this contract.
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Agreement

(Grammar) Correspondence in gender, number, case, or person between words.
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Agreement

(countable) An understanding between entities to follow a specific course of conduct.
To enter an agreement;
The UK and US negotiators nearing agreement;
He nodded his agreement.
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Agreement

(uncountable) A state whereby several parties share a view or opinion; the state of not contradicting one another.
The results of my experiment are in agreement with those of Michelson and with the law of General Relativity.
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Agreement

A legally binding contract enforceable in a court of law.
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Agreement

Rules that exist in many languages that force some parts of a sentence to be used or inflected differently depending on certain attributes of other parts.
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Agreement

An agreeable quality.
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Agreement

State of agreeing; harmony of opinion, statement, action, or character; concurrence; concord; conformity; as, a good agreement subsists among the members of the council.
What agreement hath the temple of God with idols ?
Expansion and duration have this further agreement.
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Agreement

Concord or correspondence of one word with another in gender, number, case, or person.
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Agreement

A concurrence in an engagement that something shall be done or omitted; an exchange of promises; mutual understanding, arrangement, or stipulation; a contract.
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Agreement

The statement (oral or written) of an exchange of promises;
They had an agreement that they would not interfere in each other's business
There was an understanding between management and the workers
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Agreement

Compatibility of observations;
There was no agreement between theory and measurement
The results of two tests were in correspondence
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Agreement

Harmony of people's opinions or actions or characters;
The two parties were in agreement
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Agreement

The thing arranged or agreed to;
They made arrangements to meet in Chicago
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Agreement

The determination of grammatical inflection on the basis of word relations
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Agreement

The verbal act of agreeing
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Agreement

A formal decision about future action made by two or more parties.
The agreement to collaborate on the research project was finalized.
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Jan 05, 2024

Agreement

An understanding or arrangement reached by two or more parties.
After negotiations, the parties reached a trade agreement.
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Jan 05, 2024

Agreement

The act of agreeing or coming to a mutual decision.
The agreement to merge the two companies was announced yesterday.
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Jan 05, 2024

Repeatedly Asked Queries

What is an Agreement?

An Agreement is a legally binding contract between two or more parties with enforceable terms.
Shumaila Saeed
Shumaila Saeed
Jan 18, 2024

Can an MoU lead to a formal Agreement?

Yes, an MoU can be a precursor to a formal, binding Agreement.
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Shumaila Saeed
Jan 18, 2024

What is a Memorandum of Understanding?

A Memorandum of Understanding is a document expressing mutual intentions between parties, usually not legally binding.
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Shumaila Saeed
Jan 18, 2024

How is an Agreement different from an MoU in terms of legal status?

An Agreement is legally binding, whereas an MoU is typically not.
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Jan 18, 2024

Are Agreements always written?

While most Agreements are written for clarity and legal purposes, verbal agreements can also be legally binding.
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Jan 18, 2024

Can an Agreement be broken?

Yes, but breaking an Agreement can lead to legal consequences based on the terms of the contract.
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Jan 18, 2024

What makes an Agreement legally binding?

An Agreement is legally binding when it includes offer, acceptance, intention, and consideration.
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Jan 18, 2024

Do all parties need to sign an MoU?

Yes, all involved parties should sign an MoU for it to represent mutual understanding.
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Jan 18, 2024

Is an MoU enforceable in court?

Generally, MoUs are not enforceable in court as they do not constitute a legal contract.
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Jan 18, 2024

What happens if an MoU is violated?

Since MoUs are typically not legally binding, violation doesn't usually carry legal penalties.
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Jan 18, 2024

Can an individual create an Agreement?

Yes, individuals can create Agreements, but it's advisable to have legal advice.
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Jan 18, 2024

Is an MoU a good faith document?

Yes, an MoU is often considered a document of good faith between parties.
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Shumaila Saeed
Jan 18, 2024

What is typically included in an Agreement?

An Agreement includes specific terms, conditions, obligations, and penalties for non-compliance.
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Jan 18, 2024

What is the main purpose of an MoU?

The main purpose of an MoU is to outline a mutual understanding and intention to collaborate.
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Jan 18, 2024

Can an Agreement be modified?

Yes, but modifications usually require the consent of all parties involved.
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Jan 18, 2024

What types of situations are MoUs used in?

MoUs are commonly used in international relations, business collaborations, and between government agencies.
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Jan 18, 2024

How specific is an Agreement compared to an MoU?

Agreements are generally more specific and detailed compared to MoUs.
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Shumaila Saeed
Jan 18, 2024

Why use an MoU instead of a formal Agreement?

MoUs are used when parties want to document intentions without legal commitments, often in early negotiation stages.
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Shumaila Saeed
Jan 18, 2024

How formal is an MoU?

An MoU is formal in nature but less so than a legally binding Agreement.
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Jan 18, 2024

Are oral Agreements reliable?

Oral Agreements can be legally binding but are harder to prove and less reliable than written ones.
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Jan 18, 2024

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About Author
Shumaila Saeed
Written by
Shumaila Saeed
Shumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.

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