A memorandum of understanding (MOU), also sometimes referred to as a Letter of Intent (LOI) is a document that describes an arrangement between two or more parties. It is a more formal alternative to a gentlemen’s agreement. MOU’s are generally not legally binding, but they do indicate the establishment of an informal business relationship.
An MOU often precedes a definitive, legally binding agreement. MOU’s are commonly used in Cyprus law once negotiations of a merger or acquisition have been concluded with a certain degree of certainty. A formal letter is drafted once the parties feel comfortable setting out in written form the main terms on which they wish to proceed with their transaction.
MOU’s are not intended to be legally binding however if an exclusivity or confidentiality clause is inserted then the document may become legally binding.The period of time each clause is legally binding depends on the circumstances of each provision.