Guide · Contracts · Saudi Arabia and the UAE
Is a memorandum of understanding legally binding?
The Saudi Civil Transactions Law does not name a memorandum of understanding, a cooperation agreement, or a letter of intent. A contract is formed when offer and acceptance meet. Agreeing the essential terms is enough unless the parties tied formation to a later agreement. A promise to contract binds only if the essential terms and the period are set. That is Articles 31, 42 and 43. The difference between an MoU, a contract and a cooperation agreement follows those articles, not the title on the paper. The draft that marks which clauses bind is the memorandum of understanding template. Profit sharing belongs in the partnership agreement template. The formation articles in the UAE, Bahrain, Qatar, Kuwait and Oman are under review.
This is general information, not legal advice, and it does not create a lawyer–client relationship. Laws change. Check the sources and have the text reviewed by a lawyer licensed in the relevant jurisdiction before you rely on it. Last reviewed: 22 October 2026.
When the memorandum binds
There is no article headed “memorandum of understanding”. The question is answered by the rules on formation. A contract is formed when offer and acceptance meet so as to produce a legal effect, subject to any formal requirements the statutes set for that contract. That is Article 31 of the Civil Transactions Law, Royal Decree No. M/191 of 29/11/1444H.
If the parties agree the essential terms and leave the non-essential terms for later, that is enough for the acceptance to match the offer. Disagreement on the non-essential terms does not stop formation, unless they tied formation to a later agreement on those terms. That is Article 42. A memorandum that states the essential terms and does not say it is non-binding can be held to be a contract. Calling it a memorandum of understanding does not avoid that.
A promise by which one party, or both, undertakes to conclude a contract in the future binds only if the essential terms of the future contract are set, the period in which it must be concluded is set, and the conditions of that promise are met when the promise is made. That is Article 43. A memorandum that postpones the contract without essential terms and without a period does not stand on that article.
MoU versus contract
A contract is what offer and acceptance have formed on the essential terms. “Memorandum of understanding” is the name the parties put on the paper. If the paper meets Articles 31 and 42 it is a contract even if they call it a memorandum. If it falls short, it is not a contract because of the name. It falls short because formation was not met.
The memorandum of understanding template on this site leaves the parties to name the clauses they intend to perform and the clauses that only record intent. That is a drafting choice in the template. It does not replace reading the three articles before anyone signs.
MoU versus a cooperation agreement
The statute does not give a cooperation agreement its own name, and it does not split “memorandum” and “agreement” into two types. If the paper agrees the essential terms, it is a contract under Articles 31 and 42, whether it is called an agreement or a memorandum. If it is a promise to contract later, Article 43 applies.
Sharing profit, management and exit belong in a partnership agreement, not in the memorandum. Incorporating a company belongs in a memorandum or articles of association, not in either of those. The query for a cooperation-agreement template is answered by this split: intent before a contract belongs in the memorandum, and an obligation to share profit belongs in the contract.
MoU versus a letter of intent
The statute does not name a letter of intent. If the letter is a promise to conclude a contract later, it binds only under Article 43: essential terms, a period, and the conditions of the promise met when it is made. If it is a present agreement on the essential terms, Articles 31 and 42 apply, even if it is called a letter.
This page does not sort a given letter into one or the other. That depends on its words and on the law that governs it. Earnest money is a different rule. It stays on the glossary page. It is not copied into the memorandum from here.
Formation, by country
| Country | Confirmed | Not confirmed |
|---|---|---|
| Saudi Arabia | A contract is formed when offer and acceptance meet (Article 31). Agreeing the essential terms is enough unless formation was tied to a later agreement (Article 42). A promise to contract binds only if the essential terms and the period are set (Article 43). | No article is named memorandum of understanding, cooperation agreement, or letter of intent. The answer rests on these three articles. |
| United Arab Emirates | Under review. | The contract-formation articles of Federal Decree-Law No. 25 of 2025, in force on 1 June 2026. No article number on this page. |
| Bahrain | Under review. | No text and no article number. |
| Qatar | Under review. | No text and no article number. |
| Kuwait | Under review. | No text and no article number. |
| Oman | Under review. | No text and no article number. |