Side by side
| NDA | MOU | Letter of Intent | |
|---|---|---|---|
| Purpose | Protects confidential information shared while parties explore a deal | Records a shared understanding of who does what in an ongoing cooperation | Sets out the principal proposed terms of a transaction, most often a business acquisition |
| Binding? | Yes, in full, as soon as it is signed | Mixed, named clause by clause, usually more non-binding than binding | Mixed, named clause by clause, usually more binding provisions than an MOU (confidentiality, exclusivity, and expenses commonly bind immediately) |
| Typical stage | Before or at the start of any substantive discussion | After initial discussions, before a formal agreement | After initial terms are agreed, before due diligence and definitive agreements |
| Signed by | Anyone about to share confidential information | Parties exploring an ongoing cooperation | A buyer and seller, or licensor and licensee, or investor and company, moving toward a transaction |
| Parties supported | 2 to 4, mutual or one-way | 2 to 4 | 2 |
When to use which
Use an NDA the moment you're about to share anything you wouldn't want repeated: financials, a customer list, a product roadmap, source code. It's the cheapest protection available and it's binding immediately, so there's rarely a reason not to have one signed first.
Use an MOU once two or more parties have agreed, in principle, to work together, and want that understanding in writing before drafting a full agreement. It's the right tool for joint ventures, partnerships, and pilot programs where the relationship is ongoing rather than a single transaction.
Use a Letter of Intent once you have proposed terms for an actual transaction, most commonly buying or selling a business. It lets both sides agree on price and structure in principle, and lock in exclusivity, before either side pays for due diligence and definitive agreements.
You'll often need more than one
A typical acquisition runs NDA, then Letter of Intent, then definitive purchase agreement. A typical partnership runs NDA, then MOU, then a full agreement once the details are settled. DealDocs treats them as one system for exactly this reason: build the NDA first, then move to the MOU or LOI without starting from a blank page.
Read the full guide for each
Frequently asked questions
What is the main difference between an NDA, an MOU, and an LOI?
An NDA protects confidential information and is binding the moment it is signed. An MOU records a shared understanding of a cooperation, with only some provisions binding. An LOI sets out the proposed terms of a transaction, most often a business acquisition, again with only specific provisions binding until definitive agreements are signed.
Which comes first, an NDA, an MOU, or an LOI?
Almost always the NDA, since it protects whatever gets discussed next. After that it depends on the deal: ongoing cooperations tend to move to an MOU, while a proposed acquisition or investment tends to move straight to an LOI. It's common to sign all three across the life of one deal.
Can one document replace all three?
Not well. Each is built to do one job. Folding a transaction's proposed terms into a confidentiality agreement, or leaving a cooperation's binding provisions buried inside general correspondence, is exactly the kind of gap that creates disputes later.
Which of the three is legally binding?
All three can be, in part. An NDA binds in full immediately. An MOU and an LOI are mixed documents: each states, provision by provision, what is binding today and what remains a statement of intent until a further agreement is signed.
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