Although an MOU is not legally binding, it does show the parties’ desire to proceed with a contract. The MOU, which outlines the scope and goal of the talks, can be seen of as the starting point for negotiations. These documents are most commonly seen during international treaty negotiations, but they can also be utilised in high-stakes corporate transactions like merger discussions. A Memorandum of Understanding is not a binding contract. If an MOU has been drawn for consideration, like for replacement of money, etc., the document would enhance binding on the parties, else it is a non-binding contract.
An MoU can be used in businesses, before entering into a contract, the parties can get into an understanding with regards to the representations and promises. Typically, a memorandum of understanding acts as a non-binding document in the course of commercial or private company transactions. MOU can also be found in Government and Public affair agencies