Statement of Understanding Template

Businesses are not run on word of mouth rather it requires legal agreements to work with one another. These agreements take place every time a sale or purchase is being placed and are considered a necessity because agreements protect the rights of both parties and come to a neutral decision in case of disputes and conflicts.

A statement of understanding outlines the conditions of an agreement between two parties that entered into a relation of sale or any other matter. It includes all the terms and conditions that are to be followed by both parties and mentions ruling in cases of exceptions. A statement of understanding is a legal document and holds importance in a court of law because it is devised by a law office and signed by both parties.

A statement of understanding is a written record that is mostly used in government projects, business, and other official matters to ensure that every party involved in the agreement has a clear understanding of the scope and goals of the project. Every party understands what is expected of them in terms of these agreements and the project assigned.

Contents of the statement

Contents of the statement of understanding differ based on the project or mutual contract between both parties but they generally include the following information:

  • Title of project
  • Scope of the project
  • Deadline to meet
  • Observations
  • Goals of project
  • Expected outcomes
  • Budget
  • Individual responsibilities of everyone involved
  • Timeline based on Individual tasks

All the contents vary according to the title of the project because it changes the type of research and the outcome that is expected from it.

Significance of the document

A statement of understanding is considered significant in a business setting because of the options and responsibilities it provides to every party involved in the agreement. The importance of a statement of understanding can be evaluated from the following,

  • It helps both parties to understand their responsibilities.
  • It is used as a reference throughout the project’s timeline because it is created at the start of the project.
  • The agreement is referred to during times of dispute or if a conflict arises.
  • It is important for the agreement to be in clear and plain language.
  • It serves as a legally binding contract of terms and conditions between two parties.

Sample statement

A sample for a general statement of understanding is given below,

Statement of Understanding

______________ (Party A)


_______________ (Party B)

This agreement has been agreed upon between the above-mentioned parties regarding a construction project. Terms and conditions of the contract are given below,

  • Background

This heading includes all the background knowledge of the project and mentions details if the project has been handed over to any other team or company.

  • Goals

This portion focuses on the expected outcomes of the project completion. It discusses what the party wants from a construction company and how it should achieve it.

  • Responsibility of both parties

Individual responsibilities of both parties are discussed in depth to cater to any unwanted situation. Both parties speak of their concerns regarding materials, place, etc.

  • Funding

Installments of funds provided to the construction company are mentioned to help the company in understanding the funding process and legalize the whole process so that it can be used as a claim.

  • Quality control

The client company can make it compulsory to ensure the quality of materials used for construction. This portion of the agreement may include clauses related to the quality of work.

Signed by,

______________ Party A

______________ Party B

Date: __/__/__

The above-mentioned sample can be altered for various types of other projects. Both parties can include several other clauses which protect their rights against mistakes and other issues.

Statement of understanding template

Sample Document