When our clients enter early-stage negotiations and need a simple way to outline intentions from all sides without getting locked into a binding contract, a Memorandum of Understanding (MOU) is the go-to choice.
But here’s a question we get all the time: Can an MOU be enforced in court?
The short answer: “It depends.“
For a full answer, keep reading as we:
- break down the legal enforceability of MOUs under Malaysian law
- explain when they can be binding, and
- leave you with tips to draft an MOU with full certainty it aligns with your goals
Let’s begin.
MOUs are by default non-binding
As a rule, an MOU is understood to be a non-binding document that captures a mutual understanding or intention.
However, this general rule has important exceptions.
Certain clauses within an MOU can still be legally enforceable, especially if clearly drafted in language that shows intent to create binding obligations.
Enforceable MOU clauses
Even if your MOU is non-binding, certain clauses often carry legal weight:
- Duties and Responsibilities – Each party’s roles and obligations
- Specific details or key terms – Specific dates, timelines, and deadlines
- Confidentiality / NDA – Protecting sensitive information
- Exclusivity – Preventing the other party from engaging competitors
- Intellectual Property Rights – Ownership of ideas or data shared
- Governing Law & Dispute Resolution – Jurisdiction and disputes resolution
- Non-circumvention – Preventing backdoor deals with your contacts
If these clauses are drafted clearly, Malaysian courts may uphold them — even if the rest of the MOU is non-binding.
The law behind legally binding documents
Under the Contracts Act 1950, any document in Malaysia, not just MOUs, becomes legally enforceable if it meets four key elements:
- Offer and acceptance – Both parties agree on terms
- Consideration – Something of value is exchanged
- Intention to create legal relations – A clear intent to be legally bound
- Certainty of terms – The terms are clear and specific
If your MOU includes all of the above, even unintentionally, it could be considered a binding contract regardless of its title.
This has been seen in practice through several Malaysian court decisions.
Malaysian Court judgements
These cases demonstrate Malaysian courts prioritise substance over form.
Charles Grenier Sdn Bhd v. Lau Wing Hong [1997] 1 CLJ 625
In this case, the Federal Court looked at the intention of the parties and the specific language used. The court will look at the substance of the agreement rather than the label to determine its enforceability. It ruled that an agreement can be binding if the essential terms were identified with sufficient clarity — regardless of what the document is called.
Baldah Toyyibah Kelantan Sdn Bhd v. Dae Hanguru Infra Sdn Bhd [2020] 5 CLJ 27
The Court of Appeal reinforced the view that clear terms and conduct of the parties can create enforceable obligations — even if the document is framed as an MOU. The key principle in determining its enforceability lies in examining its language, substance and terms and the parties’ conduct and intention, as evidenced by their actions, must also be considered.
Sk International (M) Sdn Bhd v. Talsu Polymer [2025] CLJU 286
The High Court held that the name or title of a document does not determine its legal effect. An agreement labelled as an MOU does not automatically make it non-binding. The essential elements of a contract, including offer, acceptance, consideration and an intention to create legal relations, must be present. Where the evidence demonstrates that parties acted in reliance on the document and performed their obligations, the court may conclude that a binding contract existed, regardless of terminology.
How to draft non-binding MOU clauses
If you don’t want a clause in your MOU to be legally binding, be sure to:
- include a clear Non-Binding Clause like “This Memorandum of Understanding is not intended to be legally binding.”
- avoid words that convey certainty like “shall” or “agree to” in favour of softer phrasing like “may” or “intend to”
On the other hand, binding clauses have their place in an MOU, and for that, we pretty much do the opposite.
How to draft binding MOU clauses
It’s important to phrase the clause such that all parties clearly express an intention for the MOU to be binding.
For example, phrasing like “This clause is intended to create legally binding obligations on the parties” is simple, clear, and unambiguous.
The key is to use clear language and specify which terms are binding and enforceable.
When to use an MOU (and when not to)
While this isn’t an exhaustive list, we’ve found that MOUs are an excellent tool when:
- you want to document initial intentions and align expectations
- you need to share confidential information
- you’re collaborating on feasibility studies or pilot projects
On the other hand, we’d advise avoiding using an MOU when:
- You’re making significant financial or legal commitments
- You need clear remedies in case of breach
- You want the other party to be fully accountable
In these cases, a contract or Memorandum of Agreement (MOA) is a better option.
Conclusion: It depends!
To rely on an MOU being non-binding, remember to be precise with the language.
The last thing you want is for a key clause to unintentionally satisfy the four elements stated in the Contracts Act 1950 and end up being legally enforceable in court!
Venice Goh is a Pupil-in-Chambers at Edwin Lee & Partners. She was called to the Bar of England and Wales by the Honourable Society of Middle Temple in 2022. Venice holds a Bachelor of Laws (LLB) with First Class Honours from the University of Liverpool, where she was recognised for outstanding academic excellence. She later pursued the Bar Training Professional Course at City, University of London, specialising in Corporate Law and Practice, followed by the Legal Practice Course at BPP University, where she graduated with Distinction under a merit-based scholarship.
