A memorandum of understanding (MOU) records a preliminary commercial alignment between parties before definitive agreements are negotiated. Functionally it overlaps with a letter of intent or term sheet: it sets out the contemplated transaction, headline economics, process, and timetable. Its defining question is always the same — what binds and what does not. Well-drafted MOUs state expressly that the commercial terms are non-binding expressions of intent, while carving out a short list of binding provisions: exclusivity, confidentiality, allocation of costs, governing law, and dispute resolution.
The risk is the poorly drafted middle ground. Courts look at substance over labels: a document titled “MOU” that contains complete essential terms and language of commitment can be read as a contract — or as an enforceable preliminary contract — regardless of its heading. The practical disciplines are simple: keep non-binding language explicit and consistent, avoid signature-block formality on commercial terms that are meant to be indicative, and never let performance begin “on the basis of the MOU” without interim documentation, because conduct is the strongest evidence of intent to be bound.
Turkish law treatment
Turkish law reaches the same destination through the Code of Obligations. Freedom of contract and formation rules (TBK art. 1 et seq.) mean a court will characterise the document by its content: a “niyet mektubu” or MOU containing the essential elements and mutual assent can constitute the contract itself, while a document committing the parties to conclude a future contract may qualify as a preliminary contract (ön sözleşme, TBK art. 29) — which must satisfy the form required for the ultimate contract (notarised form for share transfers in a limited şirket, for example). In cross-border Turkish deals, the binding carve-outs — exclusivity, confidentiality, governing law and arbitration — are precisely the clauses worth drafting with full rigour, because they are the ones a counterparty will actually test.
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