Memorandum of Understanding (MOU)

Memorandum of Understanding or MOU is a bilateral or multilateral consent between two or more parties expressing a mutual approval on any issue. The need for MOU arises in situations where in either the parties are not willing to develop a legal document or do not agree upon a legal commitment. Though it does not hold any legal binding yet it is a document signifying mutual respect and seriousness.

What should an MOU include?

A memorandum of understanding must cover the following:
  • The name of the parties involved,
  • Specify the issue, agreement and objectives of MOU,
  • Specify necessary terms,
  • Ensure clause specifying confidentiality,
  • Duly signed by all the parties involved.
Two or more parties can enter into MOU. Companies or organizations can make the use of MOU for establishing official partnerships. Government agencies can develop an MOU for defining their relationships with sister concern companies, departments or agencies. 

As per Indian Law, on broader terms, a memorandum of understanding being a non-legal binding document is not enforceable in the court of law. However, if the agreement covers the following elements then it is termed as legal in the eyes of law:

  • An offer and acceptance is made between parties,
  • Free consent from parties,
  • Competent to contract by the parties,
  • Inclusion of lawful consideration,
  • Mention of lawful object,
  • Intent for creating legal relation between parties.
Non binding MOUAgreement
Cannot be legally enforced in the court of lawCan be legally enforced
Clear specification of developing another Final document clearly  specifying all the terms
agreement at a later stageand conditions
Does not grant substantial rightsGrants substantial rights
Binds all the parties only in lieu of monetary  exchangeBinds all the parties
In order to seek legal advice in relation to memorandum of understanding, then it is wise to seek corporate lawyer in any of the cities namely, Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Pune, Goa, Kolkata, Ahmedabad, Gurgaon or Noida. 

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