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Heads of Agreement & MOU

Memorandum of Understanding & Heads of Agreement

Heads of agreement & MOU are pre-contract documents used prior to entering into a more ‘formal’ contract. Non-disclosure agreements are also used as pre-contractual documents and are covered in a separate collection dealing with confidentiality (see Confidentiality Agreements).

heads of agreement and mou‘Heads of agreement’ (HOA) and ‘memorandum of understanding’ (MOU) are terms used interchangeably to cover any agreement that is entered into prior to entering into a contract. This may be desirable where the parties are in the early stages of negotiation and wish to confirm the basic points of their agreement.  HOA’s and MOU’s are most commonly used in the following circumstances:

  1. Commercial Leasing
  2. Sale of business
  3. Joint ventures
  4. Sale of shares
  5. Distribution Agreements / supply agreements / manufacturing agreements

The Heads of Agreement, although not a fully fledged contract, can still contain binding commitments.

Heads of Agreement: General

A Heads of Agreement precedent for general use. Includes provisions relating to:

  • Subject to contract
  • Payment of costs
  • Terms to be included in contract
  • Form of contract included as Annexure  A

4 pages long.


Heads of Agreement: Lease

This Heads of Agreement precedent is for parties intending to enter into a Lease. Includes provisions relating to:

  • Identification of business
  • Identification of property from which the business is operated
  • Payment of holding deposit
  • Vendor’s costs to be paid from deposit
  • Deposit to be returned if lease does not proceed, less costs.
  • Acceptance
  • Terms to be included in contract for sale
  • Terms to be included in lease
  • No binding agreement until contract formalised.

3 pages long.


Heads of Agreement: Sale of Business

Sale of Business Heads of Agreement precedent for parties intending to enter into a Lease. Includes provisions relating to:

  • Identification of business
  • Identification of property from which the business is operated
  • Payment of holding deposit
  • Vendor’s costs to be paid from deposit
  • Deposit to be returned if lease does not proceed, less costs.
  • Acceptance
  • Terms to be included in contract for sale
  • Terms to be included in lease
  • No binding agreement until contract formalised.

4 pages long.


Author:  Kalde & Associates

‘Heads of agreement’ (HOA) and ‘memorandum of understanding’ (MOU) are terms used interchangeably to cover any agreement that is entered into prior to entering into a contract. This may be desirable where the parties are in the early stages of negotiation and wish to confirm the basic points of their agreement.  HOA’s and MOU’s are most commonly used in the following circumstances:

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