Memorandum Of Understanding Template: Sample, Key Clauses And How To Use It

If you’re negotiating a new business relationship, it’s normal to want something in writing early on - even if you’re not ready to sign a full contract yet.

That’s where a Memorandum of Understanding (often called an “MOU”) can be really useful. It can help you and the other party get aligned on the key commercial deal points, set expectations, and reduce the risk of misunderstandings.

But there’s a catch: many small business owners download a memorandum of understanding template and assume it’s automatically safe, enforceable, and fit for purpose. In reality, a template can be a great starting point, but only if you understand what an MOU is (and what it isn’t), which clauses matter, and how to avoid accidentally creating a legally binding contract when you didn’t mean to.

Below, we’ll walk you through how MOUs typically work in Australia, when you should use one, what to include, and a practical memorandum of understanding sample structure you can adapt for your business.

What Is A Memorandum Of Understanding (And Is It Legally Binding In Australia)?

A Memorandum of Understanding is a written document that records an “in principle” agreement between two (or more) parties.

In plain English, it’s usually used to capture:

• what you’re trying to do together (the project or collaboration)
• the key commercial terms you’ve discussed so far
• the process and timeline for the next steps
• who is responsible for what while you negotiate the final contract

In Australia, an MOU can be legally binding, or it can be non-binding. It depends on how it’s drafted, and what the parties say and do.

That’s why using a generic MOU template in Australia without tailoring it can create risk - your document may say “this is not binding”, but other clauses (or the way you conduct yourselves) can pull it in the opposite direction.

Binding Vs Non-Binding: The Key Distinction

Most business MOUs are drafted so that:

• the overall “deal” is non-binding (you’re still negotiating), but
• some sections are binding (like confidentiality, exclusivity, or costs)

This hybrid approach is common because it protects each party during negotiations without forcing anyone to proceed if the final contract isn’t agreed.

If you want a document specifically designed to record early-stage terms, it’s often worth comparing an MOU to a Heads of Agreement or a Term Sheet - each can suit slightly different deal contexts.

When Should You Use A Memorandum Of Understanding Template?

An MOU is often a good fit when you’re clear enough about the relationship to document key points, but not ready (or not able) to sign the full agreement yet.

Common examples we see for small businesses include:

• Joint ventures where you’re testing a partnership before committing long-term
• Supplier relationships where you want to set expectations before finalising supply terms
• Referral or collaboration deals where responsibilities are still being scoped
• Strategic partnerships where both sides want a written “roadmap”
• Preliminary steps for investment (though you may also need a term sheet)

When An MOU Might Not Be Enough

There are also plenty of situations where an MOU is not the right tool - usually because your risk is high and you need enforceable rights right now.

For example, you may want to move straight to a formal contract if:

• money is changing hands immediately (fees, deposits, or milestone payments)
• you’re delivering goods/services before the final contract is signed
• you’re granting intellectual property rights or licensing brand assets
• you need strong remedies if the other party doesn’t perform
• you’re employing staff or engaging contractors (you’ll need the correct employment/contractor documents)

In those situations, an MOU can still be helpful as a negotiation document - but you’ll generally want a proper contract drafted or reviewed before you start performance. If you’re unsure which way to go, it’s often worth getting help early through contract drafting rather than trying to patch a template later.

Memorandum Of Understanding Template: A Practical Structure (With Sample Clauses)

Below is a practical memorandum of understanding sample structure that many Australian businesses use. This isn’t a one-size-fits-all solution - think of it as a checklist you can build from.

If you want a document designed specifically for business use, a tailored Memorandum of Understanding can help you set clear expectations without accidentally creating obligations you didn’t intend.

1. Parties

Start by clearly identifying:

• the full legal name of each party (company name, individual name, trustee name if applicable)
• ABN/ACN (if relevant)
• registered address

This sounds basic, but it’s a common source of problems - especially where people use trading names or assume the “business” is the contracting party.

2. Background / Purpose

This section explains:

• what the relationship is about
• why you’re entering into the MOU
• what you hope to achieve together

Keep it short, but specific enough that it frames the deal correctly.

3. Scope Of The Proposed Arrangement

This is where you outline the “what” at a high level. For example:

• what services/products will be involved
• the geographic territory (Australia-wide, state-based, online only)
• the target market or customer segment
• what is out of scope (equally important)

Many MOUs fall over because the parties assume different scopes. Writing it down early can save a lot of time later.

4. Roles And Responsibilities

Spell out who will do what during:

• the negotiation period (before the final contract)
• any pilot phase (if you plan to test the arrangement)
• the intended long-term relationship (if you already know the broad picture)

You can also include reporting lines, meeting cadence, and who has decision-making authority.

5. Commercial Terms (If Appropriate)

Even if the MOU is non-binding overall, it can still summarise the commercial deal terms you’ve discussed so far, such as:

• pricing model or revenue split
• payment timing assumptions
• how costs will be shared during the planning or pilot stage
• proposed term (for example, 12 months) and renewal intentions

If you include numbers, be careful to label them clearly (for example, “indicative only” or “subject to final agreement”), if that’s what you mean.

6. Confidentiality (Usually Binding)

In practice, confidentiality is one of the most important “binding” clauses in an MOU.

If you’ll be sharing sensitive information - customer lists, pricing, supplier details, product roadmaps, financials - you’ll want confidentiality obligations that are clear and enforceable.

Depending on the context, you may prefer a stand-alone Non-Disclosure Agreement before you even send the first sensitive document.

7. Exclusivity (If Needed)

Exclusivity is where you agree not to negotiate with (or not to partner with) competitors for a certain period.

This can be useful, but it’s also risky if it limits your options while you’re still exploring the deal.

If you include exclusivity, consider:

• how long it lasts
• what activities are restricted
• whether there are carve-outs (for example, existing relationships)

8. Intellectual Property (IP) And Ownership

If you’re collaborating on anything creative or valuable - branding, software, content, training materials, product designs - you should think about IP early.

A good MOU should clarify, at least at a high level:

• what each party brings in (pre-existing IP stays owned by that party)
• who will own anything created during the collaboration
• whether either party can keep using materials if the deal ends

This is one of the most common “we’ll sort it out later” areas - and one of the most expensive areas to sort out later if you don’t document it upfront.

9. Term, Termination And Next Steps

Most MOUs should include:

• when the MOU starts
• when it ends (for example, after 60 days, or when the final agreement is signed)
• how either party can end discussions
• what happens on termination (return of confidential information, ongoing binding clauses)

It’s also helpful to list the next steps clearly, such as:

• due diligence to be completed
• drafting the final agreement
• internal approvals
• target date for signing

10. “Not Legally Binding” And “Binding Clauses” (Make This Crystal Clear)

If your intention is that the MOU is mostly non-binding, this should be explicit.

A common approach is to include a clause that:

• states the MOU is not intended to be legally binding, and
• lists the specific clauses that are binding (for example, confidentiality, exclusivity, costs, governing law)

This helps reduce the risk of confusion and later disputes about whether a contract was formed.

11. Governing Law And Dispute Resolution

Even when the MOU is non-binding overall, you may still want the binding clauses governed by a particular law (for example, the law of New South Wales or Victoria) and a basic dispute resolution pathway.

Depending on the circumstances, a dispute resolution clause might require the parties to first attempt to resolve issues through discussions (and sometimes mediation) before either party starts formal proceedings - but the effect of “good faith” requirements can be context-dependent, so it’s worth tailoring this to the deal.

How To Use An MOU Template Without Creating Unwanted Risk

A memorandum of understanding template can be a helpful starting point - but the way you use it matters just as much as what the document says.

Here are practical steps to keep things safe and commercially useful.

Step 1: Decide What You Actually Want The MOU To Do

Before you write anything, be clear on your goal. Ask:

• Do we want a document that’s purely a “statement of intent”?
• Do we want certain protections to be binding (confidentiality, exclusivity)?
• Are we using this to guide the drafting of the final contract?

This decision will shape the whole document.

Step 2: Keep Your Language Consistent

Many template problems come from mixing language that signals “binding contract” with language that signals “non-binding discussion”.

Words like “must”, “will”, “agree”, and “shall” can sometimes suggest commitment. That doesn’t mean you can’t use them - but you should use them carefully and consistently, especially around commercial obligations.

Step 3: Be Careful About Starting Performance Too Early

Even a well-drafted MOU can become messy if the parties start acting like the final contract is already in place.

If you plan to start work before the final agreement is signed, you may need an interim agreement (or a short-form contract) that clearly covers:

• payment terms
• who bears which risks
• liability limits (if any)
• what happens if the final agreement is never signed

This is a common point where a quick legal check can save you significant time and cost later. If you already have a draft, a contract review can help you confirm whether it matches your intention.

Step 4: Align The MOU With Your Business Structure

If you’re partnering with someone, your business structure and governance documents can affect what you can promise in an MOU.

For example:

• If you’re operating as a partnership (or forming one), you may also need a Partnership Agreement to cover decision-making and profit sharing internally.
• If you’re operating through a company with multiple owners, a Shareholders Agreement may be relevant to how major deals are approved and managed.

This is especially important where an MOU could commit your business to exclusivity, spend, or long-term arrangements.

Step 5: Confirm Who Has Authority To Sign

One practical risk small businesses run into: the person negotiating might not actually have authority to bind the other side.

Before you rely on an MOU, confirm:

• who is signing (director, authorised representative, business owner)
• whether approvals are needed (board approval, head office sign-off, investor approval)

This avoids the scenario where you invest time and money, only to hear “we can’t proceed because it wasn’t approved.”

What Other Legal Documents Should You Consider Alongside An MOU?

An MOU is usually one piece of a bigger puzzle. Depending on the deal, you may also need other documents to properly protect your business.

Common documents to consider include:

• Non-Disclosure Agreement (NDA): Useful before sharing sensitive information, particularly if the MOU discussions are still early-stage.
• Heads of Agreement / Term Sheet: A clearer “deal summary” tool in many commercial negotiations, especially where you’re planning to move quickly to final contracts.
• Formal Services Agreement or Supply Agreement: If either party is delivering goods/services, you’ll usually want clear deliverables, payment terms, and risk allocation in a binding contract.
• IP assignment or licence terms: Important if one party will use the other’s branding, software, content, or other intellectual property.
• Internal governance documents: If you have co-owners, internal agreements help you stay aligned while you negotiate externally.

The big picture is this: an MOU can help you get clarity early, but it doesn’t replace a properly drafted contract when the relationship becomes “real” (money, work, IP, customers, liability).

Key Takeaways

• A memorandum of understanding template can be a practical way to document early-stage deal terms, align expectations, and reduce misunderstandings while you negotiate a final contract.
• In Australia, an MOU can be legally binding or non-binding - it depends on the wording, the structure, and how the parties conduct themselves.
• Most MOUs are drafted so the overall deal is non-binding, but certain clauses (like confidentiality and exclusivity) are binding and enforceable.
• Key clauses usually include purpose and scope, roles and responsibilities, commercial terms (if appropriate), confidentiality, IP, term/termination, and a clear statement of what is binding vs non-binding.
• Templates are a starting point, but you should tailor the document to your exact deal, confirm signing authority, and avoid starting work or payments without a suitable binding agreement in place.

This article is general information only and does not constitute legal advice. For advice about your specific circumstances, consider speaking to a lawyer.

If you’d like help putting together or reviewing a Memorandum of Understanding for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.