Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
If you’ve ever searched what is a memorandum, chances are you’re trying to put something important in writing - without necessarily drafting a full, formal contract.
In business, a memorandum (often shortened to “memo”) is a practical tool. It can help you document decisions, set expectations, or summarise an agreement before you move to the final legal documents.
But the word “memorandum” can mean different things depending on context. Sometimes it’s an internal note to your team. Other times it’s a “memorandum of understanding” with another business. In some older corporate law contexts, you may also see “memorandum” used in phrases like “memorandum of association” - but that’s not what we’re referring to in this article.
Below, we’ll break down what a memorandum is, how it’s used in Australia, what to include, and how to avoid the most common legal pitfalls - so you can use memorandums confidently as your business grows.
What Is A Memorandum (And Why Do Businesses Use Them)?
A memorandum is a written document used to record information, decisions, or terms in a clear and structured way.
In a small business or startup context, a memorandum usually exists for one of two reasons:
- Internal clarity: to communicate decisions, processes, or expectations within your business.
- External alignment: to document an agreed direction with another party (often as a stepping stone toward a formal contract).
In plain terms, a memorandum is often about reducing misunderstandings. It helps ensure everyone is working from the same page - especially when there are timelines, money, deliverables, or responsibilities involved.
Is A Memorandum The Same As A “Memo”?
Most people use “memorandum” and “memo” interchangeably. A “memo” is usually an internal document - short, direct, and aimed at a particular audience (your staff, contractors, leadership team, or board).
For example, a memo might confirm:
- a change to your customer onboarding process
- new cybersecurity rules for staff
- a decision to stop offering a particular service
- approval to spend budget on a new supplier
What About A “Memorandum Of Understanding”?
A Memorandum Of Understanding (often called an “MOU”) is usually used between two parties. It records a shared understanding about a project or relationship, and it can be:
- non-binding (more like a statement of intent), or
- partly binding (where some clauses are intended to be enforceable, like confidentiality)
This is one of the most common sources of confusion. People will say “we’ve signed the memorandum, so we’re covered” - but depending on how it’s drafted, it may not have the legal effect they think it does.
When Should Your Business Use A Memorandum?
Memorandums are especially useful when you’re moving fast - which is most startups and many small businesses.
Here are some common situations where a memorandum can be a good business move.
1. When You Need To Document A Decision (Before Memories Fade)
In small businesses, decisions can happen quickly - on a call, in a meeting, or via Slack. If the decision has legal, financial, or operational impact, capturing it in writing is smart.
Examples include:
- approving a new pricing model
- agreeing to hire a contractor for a project
- deciding to change refund or cancellation practices
A short internal memorandum can become a useful record if questions come up later (for example, “who approved this?” or “what exactly did we agree to?”).
2. When You’re Negotiating A Deal (But Not Ready For The Final Contract)
Sometimes you and the other party broadly agree on a direction, but you’re not ready to sign the full contract yet.
This is where documents like a Heads Of Agreement or MOU can help. They can summarise the key commercial terms so everyone stays aligned while lawyers (and stakeholders) work through the details.
This is common for:
- supplier relationships
- joint ventures
- pilot programs
- distribution arrangements
- strategic partnerships
3. When You Need Something To Take To Stakeholders
Memorandums can also be used internally to brief decision-makers.
For example, you might draft a “board memorandum” or “management memorandum” that summarises:
- the opportunity
- the risks
- budget implications
- the recommended path forward
This kind of document is often paired with formal approvals and records - such as a Directors Resolution if your company structure requires it.
What Should You Include In A Memorandum?
A good memorandum is clear, structured, and written with the reader in mind.
While the exact content depends on the type of memorandum, most small business memorandums work well when they include the following.
1. A Clear Title And Date
Sounds basic, but it matters. A memorandum can quickly become hard to rely on if it’s not dated or doesn’t clearly describe what it relates to.
Examples:
- “Memorandum: Warehouse Supplier Change (Effective 1 March 2026)”
- “MOU: Pilot Program for Integration Project”
2. The Parties (Or Audience)
Be specific about who the memorandum is for.
- If it’s internal: identify the team, department, or role.
- If it’s external: name the legal entities correctly (company name, ACN/ABN where appropriate).
This avoids a common problem: the business owner signs personally when they intended the company to sign (or vice versa).
3. Purpose And Background
One short paragraph explaining “why this memo exists” goes a long way.
For example:
- “This memorandum summarises the agreed scope and timeline for the pilot.”
- “This memo sets out the updated internal approval process for refunds.”
4. The Key Points (Written Like A Checklist)
This is the core of the memorandum. Keep it practical and scannable.
You might include:
- Scope: what is included, and what is not included
- Deliverables: what will be produced or provided
- Timeframes: milestones and deadlines
- Fees and payment terms: when and how payment occurs
- Responsibilities: who does what (and by when)
- Assumptions: what the plan relies on (e.g. access to systems)
5. Next Steps
A memorandum should make it easy for someone to act.
Include a short “next steps” section like:
- who will draft the formal agreement
- what approvals are needed
- target dates for signing
- what happens if the project changes
6. Attachments (If Any)
If the memorandum refers to supporting documents - like a scope of work, pricing table, or technical specs - list them clearly as attachments. This helps avoid the “we didn’t realise that was part of it” problem later.
Is A Memorandum Legally Binding In Australia?
This is where the question of what is a memorandum becomes a legal risk question.
A memorandum can be legally binding in Australia, depending on:
- how it’s drafted
- what it says about intention
- whether it contains the essential terms of an agreement
- how the parties behave after signing it
Some memorandums are intended to be purely informational. Others are intended to lock in commercial terms. And some sit awkwardly in the middle (which is where disputes tend to happen).
What Makes A Memorandum Binding?
In general, for a document to be enforceable as a contract, there needs to be (among other things):
- offer and acceptance
- consideration (something of value exchanged)
- intention to create legal relations
- certainty of terms
Even if your document is called a “memorandum” or “MOU”, it may still operate like a contract if it has the right features. (And if you want a deeper explanation of the contract basics, what makes a contract legally binding is the key concept to keep in mind.)
How To Keep A Memorandum Non-Binding (If That’s The Goal)
If you want the memorandum to be non-binding, you generally need to be very explicit about that.
Common approaches include:
- stating it is “not intended to be legally binding”
- stating it is “subject to contract” (meaning the final agreement will be in a formal contract)
- being careful not to include language that reads like firm commitments (“must”, “will”, “shall”) if you don’t mean it
That said, it’s also common for parts of an otherwise non-binding document to be intended as binding - like confidentiality, exclusivity, or intellectual property protections. This needs careful drafting so your business gets the protection it needs without accidentally creating a broader contract than you intended.
If Your Memorandum Changes Something That Already Exists
If you already have a signed contract in place, and the memorandum is trying to “change the deal”, that can create real confusion. In many cases, you’ll be better off documenting changes properly through a Contract Amendment (or deed of variation), rather than relying on an informal memo.
This is especially important when the change affects price, scope, delivery dates, termination rights, or liability.
Common Types Of Memorandums For Small Businesses And Startups
“Memorandum” is a broad label. Here are the types we most commonly see used in day-to-day business operations, deals, and growth stages.
Internal Business Memorandum (Operations Memo)
This is the classic memo - internal, practical, and designed to communicate clearly.
It might cover:
- staff procedures
- risk management steps
- approvals and delegations
- vendor onboarding rules
- quality control processes
These can be extremely helpful for consistency as your team grows - especially when you move from “everyone knows everything” to a business with roles, handovers, and multiple locations.
Memorandum Of Understanding (MOU) For Partnerships
As mentioned earlier, an MOU is often used where you and another party are aligned on a project, but you still need to work through the final legal terms.
Common use cases include:
- co-marketing arrangements
- technology integrations
- pilot projects
- referral relationships
Depending on the deal, it may make sense to start with an Memorandum Of Understanding and then transition into a formal services agreement, distribution agreement, or licensing agreement.
Heads Of Agreement Or Term Sheet For Bigger Deals
When the deal involves funding, equity, or complex commercial terms, parties often use early-stage summary documents to align on the big picture before spending time (and money) negotiating the full suite of documents.
Two common options are:
- Heads Of Agreement (often for commercial deals or business sales)
- Term Sheet (often used in capital raising and investment discussions)
The key is being clear about what is binding and what isn’t, and making sure the document matches your negotiation goals.
Founder / Co-Founder Memorandums (Early Alignment)
In the earliest phase of a startup, founders will sometimes write a “founders memo” to capture:
- what the business is building
- who is responsible for what
- how decisions will be made
- what happens if someone leaves
This kind of document can be a helpful starting point - but if you’re building something serious, you’ll usually want to formalise it in a Shareholders Agreement (if you have a company) or a partnership agreement (if you’re operating as a partnership).
Board Or Director Memorandums (Governance And Compliance)
If you run a company, directors have legal duties and decision-making processes to follow. A board memorandum can help document:
- the background to a decision
- risks considered
- financial impact
- why a particular option was chosen
This is often used alongside formal approvals, minutes, and resolutions - and may interact with core governance documents like your company’s constitution.
Key Takeaways
- A memorandum is a written document used to record decisions, communicate expectations, or summarise terms - and it’s a practical tool for small businesses and startups.
- “Memorandum” can refer to an internal memo or an external document like a Memorandum of Understanding (MOU), so it’s important to be clear about purpose and audience.
- A memorandum can be legally binding in Australia depending on its wording, the certainty of its terms, and whether the parties intended it to have legal effect.
- If you want your memorandum to be non-binding, you usually need to clearly say so - and consider whether some clauses (like confidentiality) should still be binding.
- If you’re changing an existing agreement, a proper contract amendment is often safer than relying on a memo.
- For bigger deals, documents like Heads of Agreement or a Term Sheet can help align on the commercial terms before drafting the full contract suite.
Note: This article is general information only and doesn’t take into account your specific circumstances. It isn’t legal advice.
If you’d like help preparing a memorandum, MOU or the contract that follows, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
