An example of a memorandum of understanding is an agreement between an Internet provider and a city to provide free Wi-Fi to the city’s residents. The parties have committed to a project or a cause but have not worked out all of the details, explains Rocket Lawyer.
A letter or memorandum of understanding is used when two parties agree to cooperate or work together for a specific purpose, notes Rocket Lawyer. It commits them to an endeavor without specifying all of the details that a contract normally requires. It is used to announce a project or as evidence that the parties have committed to something, which serves as a basis to secure funding, obtain approvals, generate interest and encourage investment. Although it lacks the necessary elements of a contract, the letter assumes a degree of judicial significance as an indication of the parties’ intentions.
In the case of the Internet provider and city agreeing to provide Wi-Fi, actual performance or completion of the project may hinge on voter approval or legislation being enacted. A period of public comment may be needed to address the concerns of parents, and city attorneys may need to determine whether the city or provider is liable for copyright infringement if someone downloads music illegally. Environmental impact studies may be required or security concerns addressed. A memorandum of understanding initiates these processes and serves as the framework for moving forward until specific details are incorporated into a formal contract, according to Rocket Lawyer.