Memorandum of Understanding (MOU)
Memorandum of understanding (MoU), also known as Letter of Intent in India, is just a means for two parties to reach a decision. A Memorandum of Understanding or MOU Agreement is entered into when parties have agreed to enter into a contract, but the formalities (such as terms and conditions) of the contract are yet to be negotiated. It is made when two or more parties outlining the rights and obligations of the parties to the agreement are into initial discussions. It is used to gauge the intention of the transacting parties before a deal is officially signed between them and doesn’t grant either of them any rights. MOU’s can be kept confidential by the parties, if desired.
It does not constitute a legally enforceable obligation but, this non-legally binding MOU may be useful to serve as an agreement between two or more departments within a single public entity.
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Features of MOU:
A Memorandum of Understanding should have the following features:
1. It should specify the name & other details of the parties between whom memorandum of understanding is being signed.
2. It should clearly specify the purpose and the goals for which the memorandum is being signed.
3. It should specify the plan for the meetings between the parties. E.g. the parties can decide to meet at least once in a quarter.
4. The memorandum should specify the amount of capital contribution to be made by the parties.
5. It should also mention the person authorized to make the major financial decisions.
6. The financial record keeping of the assignment/program being undertaken should also be maintained.
7. Management: The memorandum may provide for the appointment of the persons to take care of the day to day operations of the program. The role, responsibilities, and remuneration should also be mentioned.
8. Once the MOU is prepared and agreed upon by parties involved, it should be signed and dated by the authorized individuals representing each party or organization.
9. The memorandum should specify the duration of such an agreement between the parties i.e the beginning and the ending dates of the memorandum. Also, it should provide for the circumstances in which such memorandum will be terminated.
Stepwise Process of Drafting MOU:
Login to our website and visit to the Form of MOU.
Fill in the details of the parties, details of transaction to be carried under Memorandum of Understanding, duration, arbitration and few other questions to get MOU (Memorandum of Understanding) online.
Our well-versed lawyers will work on drafting the Memorandum of Understanding for you having all the required details will be ready for you to download.
BASIC CONTENTS OF MEMORANDUM OF UNDERSTANDING – MOU
The MOU is made at the initial stage of discussion between the parties, which is usually an oral discussion. The discussions between the parties that becomes a part of a Memorandum of Understanding includes:
- the common understandings between the parties, and
- that, such MOU serves as a basis for making a formal contract later-on.
The intent of the parties can be deciphered from the contents and the material provision of the MOU. Thus, according to the intentions of the parties, Memorandum of Understanding draft shall be scrutinized and finalised. Thus the legal nature of an MOU rests on the rights, duties, obligations, it creates among parties.
What to include in an MOU format i.e. Memorandum of Understanding Format:
Following are the content of MOU:
1. Objective or Purpose of entering into MOU,
2. Responsibilities of each party,
3. Meetings and manner of Reporting,
4. Technical and Financial Support, inf any,
5. Financial Consideration, if any, involved in the transaction,
6. Person responsible for the Management,
7. Duration of MOU,
8. Confidentiality Clause,
9. Conditions driving towards Termination of MOU,
10. Possibility of Extension,
11. Ways of Communication,
12. Severability Clause,
13. Arbitration Clause,
14. Indemnity Clause, etc.
Depending upon the nature of transaction covered under MOU, the clauses can be added or removed and agreed upon with mutual consent.
LEGALITY OF MEMORANDUM OF UNDERSTANDING:
Legal validity of MOU in India:
A Memorandum of Understanding (MOU) does not constitute a legally enforceable obligation. It is commonly used for a non-binding contract, that describes the intention of the parties or businesses to work together.
If an MoU has been drawn for consideration, like for exchange of money, etc., the document would become binding on the parties, else it is a non-binding contract. The intent of the parties can be deciphered from the contents and the material provision of the MOU. Clauses such as jurisdiction clause, applicable law, indemnification have binding effects to the agreement. Thus the legal nature of an MOU rests on the rights, duties, obligations, it creates among parties.
In the Indian legal scenario, nomenclature of an agreement is irrelevant thus simply calling an agreement a Memorandum of Understanding does not automatically denote that a contract is non-binding.
Enforceability Of Memorandum Of Understanding as per Law:
MOU is governed by the Indian Contract Act, 1872, and if conditions under the Indian Contract Act are fulfilled, then the performance of an MOU can be enforced under the Specific Relief Act, 1963 where a Specific relief is granted when compensation cannot be ascertained in monetary terms.
In case where the conditions under the Indian Contract Act, 1872, are not fulfilled, the MOU is not recognised as a legally valid contract. But, it can still be enforced in the court of law based on the principles of promissory estoppels and equity.
Stamp Duty on MOU:
Normally, no stamp duty is payable on MOU. However, if the MOU incorporates an agreement to purchase immovable property worth more than Rs. 100/- and if you need to produce it in the court, it should be stamped.
A stamp duty paid document gets evidentiary value and is admitted as evidence in court. Document not properly stamped, is not admitted as evidence by the Court.
Frequently Asked Questions
MOU i.e. Memorandum of Understanding is an agreement made when two or more parties outlining the rights and obligations of the parties to the agreement are into initial discussions. It is just a means for two parties to reach a decision.
MOU does not constitute a legally enforceable obligation. It is commonly used for a non-binding contract. If an MoU has been drawn for consideration, like for exchange of money, etc., the document would become binding on the parties, else it is a non-binding contract.Clauses such as jurisdiction clause, applicable law, indemnification have binding effects to the agreement.
Normally, no stamp duty is payable on MOU. However, if the MOU incorporates an agreement to purchase immovable property worth more than Rs. 100/- and if you need to produce it in the court, it should be stamped.A stamp duty paid document gets evidentiary value and is admitted as evidence in court. Document not properly stamped, is not admitted as evidence by the Court.
Books of accounts comprise of a Journal, a Ledger book, a Trial Balance, Original and carbon copies of bills/invoices/receipts /, Cash Book, Profit and Loss A/c, Balance Sheet and Cash Flow Statements.
1.Companies or organizations can execute an MOU to establish partnerships with each other or individuals,
2.A Government Agency can execute an MOU with another agency within the same Government or another country’s Government,
3. Countries can independently execute an MOU with another country/other countries,
6. Trusts, etc.
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