Nigeria: Memorandum Of Understanding (MOU) - The One Size Fits All Document?

Last Updated: 22 November 2018
Article by Oladele Oladunjoye and Bisola Oguejiofor


It is common for parties who are desirous of entering into a business relationship to document their preliminary understanding and intention in a preliminary agreement. One of such preliminary agreements is the "popular by demand" agreement known as a Memorandum of Understanding / MOU. The expectation of most parties, when executing a Memorandum of Understanding and depending on the nature of the business relationship sought to be created, is to eventually record the negotiated and agreed terms in a definitive contractual document.

However, in recent times, the applicability of a Memorandum of Understanding has been extended beyond its primary usage such that the MOU now plays the dual role of the preliminary and definitive agreement for parties. In other words, MOU appears to have become the "One Size Fits All" document that suits all circumstances and facts.

Accordingly, this article seeks to discuss the essential nature and use of a Memorandum of Understanding, as well as explore the risks of its enforceability in commercial transactions.

The Nature of an MOU

"Black's Law Dictionary1 equates a Memorandum of Understanding to a Letter of Intent and defines it as:

"A written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement; a noncommittal writing preliminary to a contract".

Considering the definition of MOU as contained in the Black's Law Dictionary, the Supreme Court held in BPS Construction & Engineering Co. Ltd v. Federal Capital Development Authority2 that "a Memorandum of Understanding or Letter of Intent, merely sets down in writing what the parties intend will eventually form the basis of a formal contract between them. Thus, taking into consideration the elements of a valid contract, an MOU is merely a representation of the intention of the parties, subject to the execution of a formal agreement".

Furthermore, in the case of Star Finance & Property Ltd. & Anor. v. Nigerian Deposit Insurance Corporation3, the Learned Justices of the Court of Appeal described an MOU as a document entered into by contracting parties to declare their intention to contract and to guide them subsequently when they are ready to sign a legally binding contract. According to the Learned Justices, the contents of an MOU serve to fix in memory the desire of the parties which is to serve as the basis for a future formal contract; as it is not the real agreement but a document guiding the future agreement, and its status is something less than a complete contract."

Having regard to the above, an MOU as implied by its name, is a document which reflects the understanding of the parties; which may not necessarily be the final position of the Parties. By its nature, it is a preliminary document which presupposes a preconceived transaction, and can therefore be described as "an agreement to agree" or an "agreement to negotiate". It is noncommittal in nature and the contracting parties will generally not be bound by its terms.

When is an MOU ideal?

Considering the nature of an MOU, it suffices to say that an MOU is ideal at the preliminary stages of an impending transaction i.e. when the position of the parties is inchoate and the key terms of engagement have not been formalized. Accordingly, it helps the contracting parties to fill in the gap between the handshakes and the signatures. It also outlines the specific roles and responsibilities of the parties to have a clear understanding of their purpose in the agreement.

Furthermore, an MOU is ideal at the preliminary stages because it does not on the face of it, create the definitiveness that individuals may want to avoid for certain matters. Thus, it gives room inter alia to work out the commercial details to aid the preparation and finalization of the formal agreement. It also serves as an indication of some commitment by the parties to proceed with the transaction.

Following from the above, the question arises as to whether parties who have moved beyond the preliminary stages of negotiation should enter into an MOU for the legalization of their position. In other words, is an MOU the appropriate document to reflect the agreed and final terms of contracting parties?

MOU as a Definitive Agreement

Despite the nature and primary usage of an MOU, it has evolved (albeit erroneously in our opinion) as the "One Size Fits All" agreement for almost every conceivable transaction. From experience, the MOU has arguably become the most common "agreement" amongst legal practitioners and the most demanded "agreement" by parties generally for the legalization of their position.

This, by itself, may not be an issue, particularly where the actual terms of the MOU with particular reference to the language and the certainty are clear and the parties intend such agreement to be binding. After all, an agreement between two contracting parties which contains all the elements of a contract will be enforceable by the parties irrespective of the name it is so called.

Accordingly, an MOU can serve as a definitive agreement where the parties have moved beyond the preliminary stages of the contract and it is clear from the wording of the MOU that the parties intend it to be the full and final documentation, enforceable by and against them, in accordance with its terms.

However, complexities often arise where an MOU is intended to function as a definitive agreement but does not capture the agreed terms and complete intention of the parties or is made subject to the fulfilment of certain terms and conditions. It has been held that where an MOU is subject to the fulfilment of certain terms and conditions e.g. the signing of a formal document, such MOU is inchoate and not binding until those terms and conditions have been fulfilled and it would be incorrect to say that the terms are to be construed in a mandatory sense4. Indeed, where the MOU does not reflect the agreed terms of the parties, it is likely to be ambiguous; and the vaguer such an MOU is, the less likely its worth.

In other words, a document which is made subject to the execution of an agreement at a later date, is merely a preliminary move in negotiations which may or may not lead to a formal contract. In UBA Ltd V Tejumola & Sons Ltd5, Obaseki, JSC explained that "where a contract is subject to the happening of a contingency, that contract only becomes enforceable provided the event has occurred or the contingency has happened." Where the wording of the MOU is such that records the terms which the parties intend will eventually form the basis of a formal contract between them, it cannot be expressed to be binding on the parties.

Bindingness and Enforceability of a Memorandum of Understanding

As discussed above, an MOU by its primary nature and usage is nonbinding. However, in cases where the MOU contains the elements of a valid contract, the MOU will fall within the exceptional circumstance wherein a Court will find that commitment has been made between the parties, notwithstanding its general nature, and it will be held to be binding and enforceable6.

Iguh JSC, in the case of Alfotrin Ltd. V AG Federation & Ors7 stated that for a contract to be enforceable, "there must be a concluded bargain which has settled all essential conditions that are necessary to be settled and leaves no vital term or condition unsettled".

In the case of BPS Construction & Engineering Co. Ltd v. Federal Capital Development Authority (Supra), the Appellant and Respondent had executed an MOU for the provision of infrastructural facilities at designated locations. The MOU was made subject to signing a formal agreement by the parties, which was contemplated to occur within 14 days of the execution of the MOU. However, and before the execution of a formal agreement by the parties, the Appellant had incurred costs for the execution of the project based on the reliance on the promises, assurances and representations of the Respondent that a formal agreement will be executed in line with the MOU.

In determining if the MOU represented a binding and enforceable contract between the parties, the Supreme Court differentiated what constitutes a valid contract in contrast to an invitation to treat, and held that for a contract to be binding, it must contain the basic elements of offer, acceptance, consideration and capacity to contract or intention to create legal relationship, as opposed to an invitation to treat which is not an offer that can be accepted to lead to a contract.

Furthermore, Adekeye JSC in the case of BILANTE INTERNATIONAL LTD. V. NIGERIA DEPOSIT INSURANCE CORPORATION8 stated that "It is trite that before any contract or agreement can be said to have come into existence in law, there must be an unmistaken and precise offer and unconditional acceptance of the terms mutually agreed upon by the parties thereto. In other words, the parties to the agreement must be in consensus ad idem as regards the terms and conditions freely and voluntarily agreed upon by them".

Following from the above, it is clear that a Memorandum of Understanding is generally nonbinding and unenforceable. However, the courts will enforce a Memorandum of Understanding that contains all the requirements of a valid contract i.e. offer, acceptance, consideration and intention of the parties to be legally bound. Furthermore, in deciding its enforceability, the court will take into consideration, the intention of the parties which will be interpreted from the terms of the MOU and the conduct of the parties after its execution.


Although there are legal distinctions between a definitive Agreement (by whatever name so called) and a Memorandum of Understanding, there may be no legal or practical difference if they are written with similar language. The key is to focus on whether the parties intend to be legally bound by the terms of the agreement and if so drafted, a legally enforceable contract would have been created regardless of whether or not it is called a Memorandum of Understanding.

However, considering the ambiguity that abound the binding-ness and enforceability of an MOU, it becomes almost difficult to rationalize the unguided widespread resort to an MOU by lawyers, where specific, time tested agreements would be more apt to capture the agreed, final and definitive position of the Parties.

Finally, contracting parties should seek legal advice and be wary of rushing to execute MOUs particularly at the definitive stage of a transaction, going to bed only to be awaken at an ungodly hour, by the harsh knock precipitated by the hollowness of the almighty MOU.


1 Ninth Edition

2 SC. 293/2011

3 (2012) LPELR  8394 C.A.

4 BPS Construction & Engineering Co. Ltd v. Federal Capital Development Authority (Supra)

5 (1988) 2 NWLR (PT. 79) 662 at 688

6 Supra

7 (1996) 9 NWLR (PT. 475) 634 at 656

8 (2011) LPELRSC.177/1996

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions