What is a memorandum of understanding and when does it become an agreement?
A memorandum of understanding (MOU) is a writing that records what parties understand about a proposed arrangement. Under Washington law, it becomes an enforceable agreement when the parties objectively manifest assent to sufficiently definite terms and exchange consideration; calling it an “MOU” does not decide the question.[2]
What distinguishes an agreement from a negotiating memo?
| What the MOU shows | Likely effect under Washington law |
|---|---|
| The parties intend to be bound now to definite terms, with consideration | It may be an enforceable contract, even if a more formal document will follow.[2][1] |
| The parties leave a material term for future agreement, without an agreed way to resolve it | It is generally an unenforceable “agreement to agree.”[2] |
| The writing says the parties will negotiate or prepare an agreement for later review and execution | That may indicate no present intent to be bound. A separate promise to follow specified negotiating procedures would require its own formation analysis; Washington’s Supreme Court has not decided whether such a contract to negotiate is independently enforceable.[2] |
A later signature is not always the dividing line. An informal writing can establish a contract despite plans for a formal document. Washington courts examine whether the subject matter and terms were agreed upon and whether the parties intended to be bound before signing the later document.[1] Conversely, a response that conditions acceptance on a material change is ordinarily a counteroffer, not acceptance.[3]
Practical test: Read the MOU and the parties’ outward conduct as a whole. Did they commit to an identifiable bargain now, or merely record progress toward one? Washington uses objective manifestations, not an undisclosed intention or the document’s title, to answer that question.[2]