Keep in mind, however, that this letter does not replace a contract. It`s important that you sign a legally binding agreement before you start doing things underneath. A Memorandum of Understanding (MOU) is an agreement between two or more parties that sets out the terms and details of an agreement, including the requirements and responsibilities of each party. This is often the first step in forming a formal contract and does not include the exchange of money. Behavior in the normal course. .