Is this memorandum legally binding?

It depends on wording and intent. If the memorandum includes binding language, mutual signatures, and consideration, it may be enforceable; otherwise parties often use it as a non-binding record of intent.

Can I sign this electronically?

Yes. Electronic signatures are generally valid under the ESIGN Act and state e-signature laws when intent, consent, attribution, and retention are demonstrable.

Do I need a notary or witnesses?

Most memoranda do not require notarization, but certain state-specific documents or property-related instruments may. Check local requirements before notarizing or requiring witnesses.

How do I update the memorandum after signature?

Use an amendment or an addendum signed by the same authorized signers; avoid handwritten changes on an executed copy without new signatures to prevent disputes.

Where should signed copies be stored?

Store final signed copies and audit logs in secure document management systems with encryption and access controls; retain per applicable retention policies.

Who can sign on behalf of a company?

Only individuals with delegated authority or a corporate resolution should sign. Confirm signer authority in procurement or legal records to avoid enforceability challenges.

Electronic Signature
Templates
Miscellaneous
Business Understanding Memorandum

Business Understanding Memorandum

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

BUSINESS UNDERSTANDING MEMORANDUM

This Business Understanding Memorandum (the "Memorandum") is entered into as of Effective Date: by and between the parties identified below. This Memorandum records the mutual understanding of the parties regarding the subject matter described herein and is intended to govern preliminary business arrangements pending execution of any definitive agreement.

Parties

Party A (First Party)

Entity Type Corporation LLC Individual Other

Party A Address for Notice Party B (Second Party)

Entity Type Corporation LLC Individual Other

Party B Address for Notice

Recitals

WHEREAS, Party A and Party B wish to set forth their mutual understanding regarding potential collaborative business activities related to the services and deliverables described below; and

WHEREAS, the parties intend for this Memorandum to serve as a non-exclusive, non-binding statement of the primary commercial and operational terms that will govern the proposed relationship unless and until a definitive written agreement is executed; and

WHEREAS, the parties acknowledge that certain provisions included below (including confidentiality and governing law) are intended to be binding as set forth in this Memorandum.

Scope of Work

The parties agree to the following scope of work, which shall form the initial basis for performance under this Memorandum. Specific tasks, deliverables, milestones and acceptance criteria will be described in the applicable statement(s) of work or schedules to any definitive agreement.

Describe scope, deliverables, and responsibilities

Payment Terms

In consideration for the services and deliverables described above, Party B shall pay Party A subject to the following terms.

Total Compensation Payment Schedule and Milestones Method of Payment Late Payment Fee

Term and Termination

This Memorandum shall commence on Start Date: and shall continue in effect until End Date: unless earlier terminated as provided herein.

Notice Period for Termination (days)

Termination for Cause Either party may terminate immediately for material breach that remains uncured after written notice and the notice period above.

Confidentiality

For purposes of this Memorandum, "Confidential Information" means all non-public information disclosed by a disclosing party to the receiving party that is designated as confidential or that, given the nature of the information or the circumstances of disclosure, reasonably ought to be considered confidential. The receiving party shall: (a) hold Confidential Information in strict confidence and not disclose it to any third party except as expressly permitted herein; (b) use Confidential Information solely to evaluate or perform the business relationship described in this Memorandum; and (c) take at least the same degree of care to protect Confidential Information as it uses to protect its own confidential information, but in no event less than reasonable care.

The obligations in this section will survive termination of this Memorandum for a period of three (3) years, except that trade secrets shall be protected for so long as they qualify as trade secrets under applicable law.

Governing Law

This Memorandum shall be governed by and construed in accordance with the laws of: without regard to its conflict of laws principles.

Entire Agreement; Miscellaneous

This Memorandum constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior discussions and agreements. No amendment or waiver of any provision of this Memorandum will be effective unless in writing and signed by both parties. If any provision of this Memorandum is held to be invalid or unenforceable, the remaining provisions will remain in full force and effect. Neither party may assign this Memorandum without the prior written consent of the other party, except to an affiliate or successor in interest.

Notices

All notices required or permitted under this Memorandum shall be in writing and delivered to the notice address provided above or to such other address as a party may designate in writing. Notices are effective upon receipt.

Additional Provisions or Special Conditions

Party A:

By:

Date:

Party B:

By:

Date:

What a Business Understanding Memorandum Is

A Business Understanding Memorandum documents the agreed scope, assumptions, responsibilities, and deliverables between business parties before a formal contract is drafted. It records key facts, timelines, decision rights, and commercial terms so stakeholders have a shared baseline for negotiations, risk assessment, and project planning. The memorandum is typically non-binding unless specifically drafted as binding and is used to avoid misunderstandings during the contracting process.

Why a Clear Memorandum Matters

A Business Understanding Memorandum reduces ambiguity, speeds negotiations, and creates a documented record of intent that supports later contract drafting and audit trails.

Who Typically Prepares and Reviews This Memorandum

Different roles prepare or review the memorandum depending on project scale and risk.

Project managers and program leads who need a clear scope and delivery milestones documented.
Legal counsel and contract managers who check wording that may affect later binding agreements.
Procurement or finance teams verifying cost assumptions, billing terms, and approval authorities.

Use the memorandum as a collaborative working document that is updated before signing any formal contract.

Primary Signers and Stakeholders

Business Lead

A senior manager or director who owns the project and certifies that the scope and resource commitments described reflect the business intent and available budget.

Legal Reviewer

In-house or outside counsel who evaluates legal risks, clarifies whether provisions are binding, and recommends language changes before the memorandum is finalized or converted to a contract.

Core Sections to Include in a Professional Memorandum

A concise Business Understanding Memorandum groups essential information into standardized sections so readers can quickly locate scope, assumptions, deliverables, timelines, and authority.

Purpose

Summarize why the parties prepared this memorandum and the intended outcome; keep to a single clear objective to avoid scope creep or mixed expectations.

Scope

Define deliverables, boundaries, and exclusions clearly so readers understand what work is included and what is explicitly out of scope for this engagement.

Assumptions

List factual assumptions supporting scheduling, resourcing, and costs; identify dependencies on third parties or approvals that could affect delivery.

Responsibilities

Allocate tasks, decision rights, and points of contact for each party to prevent overlap and establish escalation paths for disputes.

Timelines

Provide milestone dates and acceptance criteria for deliverables to enable progress tracking and trigger contractual deadlines.

Signatures

Include authorized signers, effective date, and any disclaimers about whether the memorandum is binding or subject to a later definitive agreement.

Step-by-Step: Completing the Memorandum

Follow these steps in order to draft, review, and finalize a clear Business Understanding Memorandum.

01

Draft: Populate purpose, scope, assumptions, and timelines.
02

Internal Review: Circulate to legal and finance for comment.
03

Client Review: Send to counterparty for confirmation or edits.
04

Finalize: Obtain authorized signatures and record the effective date.

Configuring an Online Workflow for This Memorandum

Set up a digital workflow that routes the memorandum to reviewers and signers in the correct sequence to preserve decision history.

Field	Configuration
Signer Order	Sequential routing by role
Authentication	Email + optional SMS code
Notifications	Automated reminders at set intervals
Retention	Archive signed copy and audit log

Typical eSignature Flow for the Memorandum

An electronic signing workflow ensures a complete audit trail, clear attribution, and documented consent consistent with U.S. e-signature law.

Upload Document: Add the finalized memorandum PDF or DOCX.
Place Fields: Add signature, date, and initial fields.
Send to Signers: Enter signer emails or generate links.
Capture Audit Trail: System records timestamps, IP, and actions.

Technical Considerations for Digital Completion

Choose a platform that supports required authentication, audit trails, and file formats for your use case.

File Formats: PDF, DOCX supported
Authentication: Email, SMS, or stronger
Integrations: CRM and storage systems

Confirm the platform meets legal and security needs for the memorandum before routing for signatures; preserve the audit trail for future reference.

Security and Compliance Checklist

Encryption: AES-256 at rest

Transport: TLS 1.2/1.3 in transit

Certifications: SOC 2 Type II

Health Data: HIPAA (BAA needed)

FDA Records: 21 CFR Part 11 supported

Privacy: GDPR and CCPA compliance

Principal Risks When the Memorandum Is Incorrect

Misaligned Scope: Leads to disputes and cost overruns

Incorrect Authority: Signatures may be unenforceable

Missing Dates: Affects milestone enforcement

Ambiguous Terms: Creates litigation exposure

HIPAA Violations: Risk for healthcare data breaches

Document Loss: Hinders audits and compliance

Common Preparation Errors to Avoid

Using informal or inconsistent party names that do not match legal registrations, which can complicate later contract enforcement and payments.
Failing to record key assumptions and dependencies, causing unplanned delays when third-party approvals or resources are unavailable.
Omitting approval authority or signature limits, producing invalid commitments when staff lack delegated signing authority for the project.
Leaving timelines vague or open‑ended instead of specifying milestone dates and acceptance criteria, which makes dispute resolution harder.

Timing Considerations and Typical Deadlines

Identify milestone dates, review cycles, and expected approval deadlines to keep the project on schedule and preserve contractual leverage.

Draft Circulation:

Allow 3–7 business days for internal review

Counterparty Review:

Request 5–10 business days for comments

Final Revisions:

Expect 1–3 business days for last edits

Signature Window:

Set a 7–14 day signature deadline to avoid stale terms

Record Retention:

Archive signed copy immediately after execution

Sample eSignature Pricing and Feature Comparison

Basic vendor-level pricing and feature availability to consider for executing and storing Business Understanding Memoranda; check vendor sites for plan details.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No cap	100 envelopes/user/year	Varies	Varies	Varies

Representative Use Cases and Customer Experience

Real organizations have used structured memoranda and digital signing to accelerate approvals and reduce manual follow-up.

Optica Ventures

The team needed a simple, shareable record of project assumptions and timelines to start work quickly

The memorandum captured scope and contact points
Brian Fitzgibbons, COO, says the interface is simple and easy for the team and customers, helping move projects from discussion to execution while preserving an audit trail.

Xerox

A large operations team required repeatable templates and integration with ERP systems

Templates reduced rework across engagements
Kodi‑Marie Evans, Director of NetSuite Operations, highlights flexibility to get signatures in the right formats and integrate them into NetSuite workflows.

Frequently Asked Questions about the Memorandum

Answers to common questions about enforceability, signatures, revisions, and recordkeeping for Business Understanding Memoranda.

Need help? Contact support

Is this memorandum legally binding?
It depends on wording and intent. If the memorandum includes binding language, mutual signatures, and consideration, it may be enforceable; otherwise parties often use it as a non-binding record of intent.
Can I sign this electronically?
Yes. Electronic signatures are generally valid under the ESIGN Act and state e-signature laws when intent, consent, attribution, and retention are demonstrable.
Do I need a notary or witnesses?
Most memoranda do not require notarization, but certain state-specific documents or property-related instruments may. Check local requirements before notarizing or requiring witnesses.
How do I update the memorandum after signature?
Use an amendment or an addendum signed by the same authorized signers; avoid handwritten changes on an executed copy without new signatures to prevent disputes.
Where should signed copies be stored?
Store final signed copies and audit logs in secure document management systems with encryption and access controls; retain per applicable retention policies.
Who can sign on behalf of a company?
Only individuals with delegated authority or a corporate resolution should sign. Confirm signer authority in procurement or legal records to avoid enforceability challenges.

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