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Memorandum of Understanding (MOU)

A Memorandum of Understanding (MOU) is a non-legally binding written agreement that outlines the expectations and responsibilities of two parties when a formal contract is not yet in place. It serves as a structured alternative to a handshake, documenting mutual understanding while both sides work toward a finalized legal agreement.

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About this video

A Memorandum of Understanding (MOU) is a formal but non-legally binding document that captures the mutual expectations and agreed-upon terms between two parties. It is used when organizations need something more structured than a verbal agreement or handshake, but a full legal contract is not yet feasible because negotiations are still ongoing or key details remain unresolved. Both parties sign the MOU to signal commitment and shared understanding, while retaining flexibility as discussions continue toward a final, enforceable agreement. The document typically outlines the roles, responsibilities, and expectations of each party in clear, straightforward terms. MOUs are particularly valuable in situations where the path to a legal contract is long and complex. A business sale, for example, can require months of financial review, due diligence, and negotiation before all parties are ready to commit to binding terms. An MOU in that context establishes a foundation of good faith and documented intent, reducing ambiguity and keeping both sides aligned throughout the process. While it carries no legal consequences if one party fails to follow through, it provides a meaningful level of accountability and professionalism that a handshake alone cannot offer.

What you'll learn

What's covered

Memorandum of Understanding (MOU)

Aligned to

NIST 800-53
CA-3 Information Exchange
CompTIA Security+
5.1 Summarize elements of effective security governance.
5.3 Explain the processes associated with third-party risk assessment and management.
ISC2 CISSP
1.6 Develop, document, and implement security policy, standards, procedures, and guidelines

Key terms

Memorandum of Understanding
MOU
A Memorandum of Understanding is a non-binding agreement between parties that documents shared intentions, responsibilities, and expectations, commonly used in security contexts for information sharing, incident response coordination, and interagency cooperation.

Topics

Memorandum Of Understanding Legal Agreements Vendor Agreements Governance Risk Compliance Security Policies

Transcript

An Agreement That Isn't Legally Binding

There are times when we want to set up an agreement with somebody, but we don't want to have it legally binding. That's where a memorandum of understanding comes into play, or an MOU.

When you're working with another company, whenever you agree on something you really need to get it in writing. Not only that, but you need to have it in some sort of legally binding contract. However, that's not necessarily feasible all the time. In that case we would use a memorandum of understanding, in which case we would outline all the expectations of both parties and what we understand to be true between the two parties. We would both sign it at that point in time, but it's not necessarily legally binding.

When Would We Use One

A lot of times we are expecting to have a legal contract that we both agree upon and we're going to sign, so that way there are some legal repercussions from it. But we're not at that stage yet. We haven't agreed on all of the particulars, all of the details of that contract, so we're not ready to sign and commit to the contract at this point in time. But if we were just to rely on a handshake and nothing written down, that's problematic as well. So we create this memorandum of understanding, so we can create all of the expectations between the two parties and understand we're working towards a legal document, but we're not at that stage yet.

A good example of this is a sale of a business. When you're going through a sale of a business, it could take months for you to be able to assess the business and get all of the details hashed out, but you want a certain amount of buy-in, a certain amount of commitment. That's where a memorandum of understanding can come into play, because it just takes it to the next level besides just a simple handshake.

A Sample Format

Here's a sample format of a memorandum of understanding that you can download from the state of Oregon. If I just scroll through here, it just outlines the rules and responsibilities of both parties and what the expectations are. As you can see, it can be fairly simplistic.

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