Memorandums of Understanding (MoUs) are generally not legally binding, but they reflect a mutual intent to proceed with an agreement and carry more weight than a verbal or informal “gentleman’s” agreement. They are often used as a preliminary step before drafting a formal contract. For example, if you are buying a house but can only pay after six months, you and the seller can sign an MoU stating your intent to pay later, along with a token advance. The formal legal contract would be executed at a later stage.