Memorandum of Agreement vs. Memorandum of Understanding in the Philippines: Key Differences and Uses

Executive summary

In the Philippines, “Memorandum of Agreement” (MOA) and “Memorandum of Understanding” (MOU) are labels commonly used to document collaborations, partnerships, and transactions. The label itself doesn’t control enforceability—what matters is the content and whether the document satisfies the elements of a contract under the Civil Code. In practice, however, parties use MOUs for non-binding intent and early-stage alignment, and MOAs for definitive, binding obligations with clear deliverables, budgets, and timelines.

This article explains how Philippine law treats MOAs and MOUs, the typical contents of each, when to use which, enforceability, formalities (board or sanggunian authority, notarization, apostille), government and cross-border nuances, tax/documentary implications, data privacy/IP considerations, and practical drafting tips—with checklists and sample clause language.

Foundations in Philippine contract law

Elements of a binding contract

A document—whether titled MOU or MOA—tends to be binding if it contains:

Consent of the contracting parties (offer and acceptance).
Object certain (identifiable prestation—what each party must do or give).
Cause/consideration (why obligations are assumed—payment, mutual promises, etc.).

If these are present and the parties intend to be bound, courts generally treat the document as an enforceable contract regardless of the heading “MOU” or “MOA.”

Form requirements

General rule: Contracts are valid regardless of form, unless a specific law requires a particular form for validity or enforceability (e.g., transfers of real property, suretyship) or for greater efficacy (e.g., notarization for public documents).
Statute of Frauds: Certain agreements must be in writing to be enforceable (e.g., sale of real property or interests therein; agreements not to be performed within a year; representations regarding credit of a third person). If your “MOU” addresses any of these, it should be in writing and drafted with contractual precision.

Notarization

Notarization converts a private document into a public document, improving probative value and facilitating registration (e.g., with the Registry of Deeds for real-property dealings) or use before government offices. It also typically requires signatory personal appearance and competent IDs under the Rules on Notarial Practice.

MOA vs. MOU at a glance

Aspect	MOU (Memorandum of Understanding)	MOA (Memorandum of Agreement)
Typical purpose	Express intent to collaborate; outline principles, scope to be developed; exploratory	Definitive agreement governing the collaboration; allocates risks/benefits; binding obligations
Level of detail	High-level: objectives, proposed scope, areas for cooperation, next steps	Detailed: scope of work, deliverables, timelines, budgets, KPIs, warranties, indemnities
Binding nature	Often non-binding except for specific clauses (e.g., confidentiality, exclusivity)	Generally binding overall, with standard commercial and legal terms
Use cases	Early-stage partnerships, academic/industry linkages, feasibility studies, pre-procurement industry dialogues	Inter-agency implementation, fund transfers or sub-projects, vendor/consultancy engagements (outside 9184 scope), PPP implementation arrangements, joint research with funding
Approvals	May need conceptual approval; typically lighter internal process	Usually requires formal approvals (e.g., Board resolution, Sanggunian authorization, head of agency sign-off)
Risk allocation	Minimal; defers details	Full allocation of risk, liability, IP, data, termination consequences
Payment terms	Rarely included; or expressly “subject to a future agreement”	Clear price/funding flow, milestones, acceptance, invoicing, audit rights
Dispute resolution	Often omitted or indicative	Express: escalation, mediation/conciliation, arbitration or courts, venue/governing law
Regulatory interface	Typically none, or “no-obligation/no-commitment” caveats	May trigger procurement, audit, tax, data privacy, IP, labor, or sectoral regulations

Key takeaway: Courts look at substance and intent. If an “MOU” reads like a complete contract with obligations, consideration, and specific terms, it can be enforced like an MOA.

Common Philippine contexts and special rules

1) Private sector & NGOs

MOU to frame collaboration intent (e.g., pilot projects, fundraising partnerships, joint advocacy).
MOA when moving to implementation (fund disbursement, deliverables, monitoring, reporting, liquidation).

2) Government, GOCCs, and LGUs

Authority to contract: Heads of agencies or LGU chief executives typically require board or sanggunian authorization for certain agreements. Check agency charters, the Revised Corporation Code for GOCCs, and the Local Government Code for LGUs.
Inter-agency MOAs: Often used for fund transfers, joint programs, and use of facilities/resources, usually with audit and reporting covenants, and liquidation and reversion provisions.
Procurement overlay: If the arrangement is in substance a procurement of goods/infra/consulting, the Government Procurement Reform Act (RA 9184) and its IRR may apply (including alternatives such as agency-to-agency procurement, MOA-based implementation, or grants/cooperation outside procurement). Labels don’t exempt transactions from 9184 if the substance is procurement.

3) Academia, research, and international cooperation

MOUs frame academic exchanges, joint research intent, and mobility programs.
MOAs govern funding, IP ownership, publication rights, ethics approvals, export controls (if any), and data sharing compliant with the Data Privacy Act of 2012 (DPA) and its IRRs.
For foreign entities, consider apostille for foreign-signed documents (the Philippines recognizes apostilles) and tax implications for inbound grants.

4) Cross-border deals

Decide governing law and dispute forum (Philippine courts vs. arbitration).
For documents executed abroad: use apostille (or consularization if the country isn’t part of the Apostille Convention).
Be explicit about foreign exchange, withholding taxes, and regulatory approvals (e.g., BSP for certain foreign loans or investments).

Anatomy of each document

Typical MOU structure (non-binding core, binding carve-outs)

Preamble/Background (purpose; no commitment to proceed).
Objectives/Areas of Cooperation (descriptive; no performance obligations).
Process & Next Steps (joint working group; target to negotiate a definitive MOA).
Confidentiality (binding).
Exclusivity/No-shop (binding, if agreed).
Data Sharing Principles (binding to the extent personal data is exchanged).
IP Principles (ownership of background/foreground IP—usually indicative).
Costs (each party bears own costs unless otherwise agreed).
Term & Termination (easy exit; automatic lapse if no MOA by a date).
No Agency/No Partnership/No Employment (avoid unintended relationships).
Governing Law & Dispute Resolution (sometimes indicative; may still be binding).
Non-binding Clause: express statement that the MOU (except specified sections) is not intended to create legal obligations.

Typical MOA structure (definitive, binding)

Definitions and Interpretation.
Scope of Work/Project Description (specific deliverables and acceptance).
Timelines & Milestones; Service Levels/KPIs.
Budget/Price, Invoicing, Payment Terms, Taxes/Withholding, Liquidation (if public funds).
Governance (steering committee; reporting).
Representations & Warranties (authority; compliance with laws; anti-corruption).
Risk Allocation: indemnities, liability caps, force majeure, insurance.
IP Ownership & Licensing; Moral Rights considerations.
Data Protection under DPA: roles (controller/processor), lawful basis, data sharing agreement (DSA) where applicable, security measures, breach notification.
Confidentiality and Publicity/Use of Names & Logos.
Subcontracting/Assignment restrictions.
Compliance (labor standards, EHS, sanctions/ABAC).
Termination (for convenience; for cause; cure periods; wind-down).
Dispute Resolution (escalation; mediation; arbitration or courts; venue).
Miscellaneous (notices, entire agreement, amendments in writing, severability, counterparts).
Signatures, Acknowledgment/Notarization, Schedules/Annexes (SoW, budget, timeline, technical specs).

Enforceability: intent and specificity rule of thumb

Non-binding MOU: Include a clear non-binding clause and avoid language of commitment (e.g., “shall,” “must,” “will pay”). Use “may,” “intend,” “aim to,” “subject to a definitive agreement,” and reserve all rights to discontinue negotiations without liability.
Binding MOA: Use mandatory language, define consideration, deliverables, risk allocation, and include a dispute mechanism.
Hybrid: Many MOUs are binding only as to confidentiality, exclusivity, governing law, and dispute resolution. Identify those sections expressly.

Corporate, LGU, and agency authority

Corporations/GOCCs: Verify signatory authority (e.g., Board Resolution or Secretary’s Certificate). The Revised Corporation Code requires acts to be within corporate powers and proper authorization.
LGUs: Contracts by the local chief executive often require Sanggunian authorization and are subject to audit and compliance with budgeting, accounting, and procurement rules.
Public funds: Where funds move between agencies or to implementing partners, include utilization, liquidation, return of unspent funds, COA access, and records retention.

Tax and documentary considerations (high level)

Documentary Stamp Tax (DST) may apply to specific underlying transactions (e.g., loans, share transfers, leases, life insurance). An MOA that embodies such a transaction can attract DST even if titled “MOU.”
Withholding taxes on payments to vendors/consultants; VAT considerations for goods/services supplied in the Philippines.
Grants/donations may have donor’s tax or exemptions depending on status; check donee/accreditation rules where relevant.

Data privacy & IP

Data Privacy Act (RA 10173): If personal data will be shared or processed, incorporate a Data Sharing Agreement or Data Processing Agreement as needed. Define roles (controller/processor), lawful basis, purpose limitation, security measures, cross-border transfer safeguards, and breach notification.
Intellectual Property: Distinguish background IP (pre-existing) from foreground IP (developed under the project). Allocate ownership and license rights, address moral rights for authors, and define publication/branding rules.

Practical drafting tips (Philippine context)

Choose the right instrument
- Use an MOU to frame intent and structure the path to a definitive MOA; time-box negotiations.
- Use an MOA for implementation or when any party will commit resources, incur costs, or take on risk.
Be explicit about binding effect
- Put a conspicuous Non-Binding Clause in MOUs, and list binding carve-outs (confidentiality, exclusivity, governing law, dispute resolution, compliance with DPA).
Authority & approvals
- Attach Board/Sanggunian resolutions or Secretary’s Certificate; require signatories to warrant authority.
Government/COA/9184 issues
- If the arrangement looks like procurement, treat it as such (eligibility, bidding/alternative methods, NOA, NTP). If it’s a grant or inter-agency arrangement, include liquidation and audit clauses.
Payment & audit trails
- Define milestones, acceptance, invoicing, withholding, VAT, liquidation (if public funds), records retention, and right to audit.
Risk allocation
- Include warranties, indemnities, caps, insurance, force majeure, and termination rights proportionate to the project.
Data & IP
- Insert a DPA-compliant data sharing/processing section when applicable; address IP ownership/licensing and publication.
Disputes
- Choose suitable venue (e.g., courts of Makati, Quezon City) or arbitration (with seat/rules). For cross-border deals, ensure enforceability.
Notarization & execution
- Notarize for evidentiary value and for filing/registration needs; plan apostille for foreign signatories. Enable counterparts and e-signatures consistent with e-commerce/electronic documents rules where applicable.
Avoid unintended relationships
- Insert No partnership/agency/joint venture unless that is truly intended.

Sample clauses (illustrative only)

Non-Binding Clause (MOU)

The Parties acknowledge and agree that, except for Sections $Confidentiality$, $Exclusivity$, $Governing Law and Dispute Resolution$, and $Data Protection$, this MOU is a statement of present intentions only and does not create any legally binding obligations. No Party shall be liable for failure to enter into any definitive agreement.

Binding Nature (MOA)

This MOA constitutes the entire agreement between the Parties with respect to the Project and creates legally binding obligations enforceable in accordance with its terms.

Authority Warranty

Each Party represents and warrants that it has full power and authority to enter into this $MOU/MOA$, and that its signatory is duly authorized pursuant to appropriate corporate or governmental approvals.

Data Privacy

The Parties shall process Personal Data solely for the Project purposes, implement appropriate organizational, physical, and technical measures, and comply with the Data Privacy Act of 2012 and its IRRs. Where data sharing occurs, the Parties shall execute a Data Sharing Agreement consistent with NPC issuance(s).

Audit & Liquidation (public funds)

Recipient shall use the Funds solely for the Project, maintain separate books, submit liquidation reports with supporting documents within $X$ days from completion, and allow the Commission on Audit or its representatives access to relevant records.

Dispute Resolution

Any dispute arising out of or in connection with this $MOU/MOA$ shall first be resolved through good-faith negotiations and, failing such resolution within $30$ days, shall be submitted to $mediation/arbitration$ under $institution/rules$, with venue at $City$, Philippines. Philippine law shall govern.

Checklists

Quick decision tree

Is this exploratory? → MOU (non-binding with binding carve-outs).
Are there concrete deliverables/funds/risks? → MOA (binding).
Does it look like procurement/public spending? → Consider RA 9184 and audit/liquidation clauses.
Will personal data or IP be created/shared? → Add DPA and IP terms.
Are government or LGU signatories involved? → Confirm legal authority and approvals.

Pre-signature package

Draft document (MOU/MOA) with annexes (SoW, budget, timeline).
Authority docs: Board resolution/Secretary’s Certificate; Sanggunian resolution if LGU.
Compliance: DPA checklist; tax/VAT/withholding analysis; insurance requirements.
Execution: Notarization instructions; apostille (if any foreign execution); counterparts/e-signature setup.

Frequently asked questions (PH context)

1) Can an MOU be enforced in court? Yes, if it reads like a complete contract (consent, object, cause) and shows intent to be bound. If you truly want a non-binding MOU, use clear non-binding language and avoid obligations.

2) Do we need notarization? Not required for validity in most cases, but highly advisable for evidentiary strength and for filings/registrations. Required for certain transactions (e.g., real estate conveyances) or when filing with government offices.

3) Who should sign for corporations and LGUs? Authorized representatives. Corporations typically present a Secretary’s Certificate referencing board authority. LGUs often need Sanggunian authorization and the LCE’s signature.

4) Does using an MOA avoid procurement? No. Substance over form: if the deal is really the acquisition of goods/works/services by a government entity, procurement rules may apply.

5) Is there tax on an MOU/MOA? Not by the label itself. Tax and DST depend on the underlying transaction (e.g., loan, lease, sale). Payments may attract withholding and VAT.

Bottom line

The difference between MOA and MOU in the Philippines is functional, not formal: MOU = intent and framework (usually non-binding), MOA = definitive, binding obligations.
Courts look past the title to the content and intent. Draft accordingly, secure proper authority, satisfy statutory formalities, address DPA/IP, and align with procurement/audit requirements where relevant.

This article provides general information for the Philippine context. For specific transactions, tailor the instrument and seek qualified counsel based on the facts, counterparties (private vs. government), and sector-specific rules.