Memorandum of 
Understanding

Introduction

In India Memorandum of Understanding (MOU) is also known as the Letter of Intent in which two parties conclude a decision. It is a type of Agreement entered when two or more parties have agreed on such terms and conditions to enter into a contract, but the contract is yet to be negotiated and finalized.

MOU is made when two or more parties are at the initial stage of discussion outlining the rights and obligations of the parties with whom agreement is to be entered. It is used as an indicator to check the intention of the parties transacting before a deal is officially signed and executed between them and it doesn't grant either of them any rights and can also be kept confidential, if desired.

It cannot be constituted legally and is not enforceable by law but is a non-legally binding MOU which may be useful serving as an agreement between two or more departments within a single public entity.

Legal Window has a team of experts providing you with the best assistance, timely delivery and guaranteeing the highest customer satisfaction with respect to legal drafting of MOU. You may get in touch with our team on 072407-51000 or email admin@legalwindow.in

Features of Memorandum of Understanding

A Memorandum of Understanding must have the following features:

It must specify the name and other details of the parties entering into a memorandum of understanding.

It must clearly specify the purpose of the MOU and the goals for which it is being signed.

It must specify the time period of and the plan for the meetings between the parties to the MOU. E.g. the parties can decide to meet at least once in a quarter.

The memorandum of understanding should state the amount of capital contribution to be made by each of the parties.

It should also specify the person authorized under the MOU to make the important and major financial decisions

The financial record of the assignment/program being undertaken must also be kept.

The MOU may also guide for the appointment of the persons to look after the day to day operations of the program along with their role, responsibilities, and remuneration

Once the MOU is agreed by parties to it, it should be duly signed and dated by the authorized representatives of each party or organization representing them.

The memorandum of understanding should mention the duration of such agreement executed amongst the parties i.e. the beginning date and the ending date of the memorandum. Also, termination clauses must be mentioned providing the circumstances in which such memorandum will be terminated.

Basic Contents of Memorandum of Understanding

MOU is made when two or more parties are at the initial stage of discussion outlining the rights and obligations of the parties with whom agreement is to be entered which is usually an oral discussion. The discussions done between the parties that becomes a part of a Memorandum of Understanding which includes:

  • common understandings between the parties, and
  • MOU (i.e. terms & conditions ) serving as a basis for entering into a formal contract later-on.

The Memorandum of Understanding depends on the intention of the parties & shall be drafted, scrutinized and finalized on the basis of that. Thus the legal nature of an MOU depends on the rights, duties, obligations amongst the parties.

Contents to be Included in Memorandum of Understanding

Objective or Purpose of Memorandum of Understanding

Responsibilities to be undertaken by each party

Manner of Reporting and Meeting to be conducted

Technical & Financial Support, if any

Financial Consideration in the transaction, if any involved

Management and the person responsible

Duration of the Memorandum of Understanding

Clause for Confidentiality

Situations driving towards Termination of MOU

Possibilities of Extension

Ways of Communication

Clause of Severability

Arbitration Clause

Indemnity Clause, etc

Process of Drafting Memorandum of Understanding

1. Placing request
As we receive a request from you for drafting of a Memorandum of Understanding, our expert team will share a questionnaire to be filed by you for taking your request forward. In which basic details will be sought like duration, arbitration, details of transactions etc.

2. Drafting of Agreement
After receiving the said questionnaire and the information relevant for drafting of the Memorandum of Understanding we will begin to draft the same and if in need we require any other information the same will be sought by us through a call. The drafting of Memorandum of Understanding might take 2-4 business days.

3. Sharing of Ist draft
Once the MOU is ready from our side we will share a draft of the same with you for final approval. If you find the same in order the final copy will be shared in a day and if corrections or additions are required then the same will be revised and verified by our team.

4. Sharing of Final Agreement
Our experts will do the needful and the same will be shared with you as final MOU.


Sample of Memorandum of Understanding

FAQs on Memorandum of Understanding (MOU)

What is a Memorandum of Understanding?

It is a type of Agreement entered when two or more parties have agreed on such as terms and conditions to enter into a contract, but the contract is yet to be negotiated and finalized.

MOU is made when two or more parties are at the initial stage of discussion outlining the rights and obligations of the parties with whom agreement is to be entered. It is used to an indicator to check the intention of the parties transacting before a deal is officially signed and executed between them.

Whether stamp duty is required to be paid on the Memorandum of Understanding?

Normally, no stamp duty is payable on the Memorandum of Understanding. However, if the Memorandum of Understanding states that the clause to purchase immovable property worth more than Rs. 100/- and if the same is required to be produced in the court then it should be stamped. The documents on which stamp duty is paid gets evidentiary value and is admissible as an evidence in the court. Documents which are not properly stamped are not admitted as evidence by the Court.

Whether Memorandum of Understanding is legally binding?

No, it is not legally enforceable. It is commonly used to create a non-binding contract.

If an MOU is drawn for consideration for e.g. for exchange of money, etc., then the said document becomes legally binding on the parties otherwise it is a non-binding contract. Clauses like jurisdiction clause, applicable law, indemnification do have binding effects to the agreement.

Who can use the Memorandum of Understanding?
  • Companies;
  • Government Agencies can execute MOU with another agency with the government of other country or same country;
  • Countries can independently execute Memorandum of Understanding;
  • Natural Individuals;
  • Trust;
  • various other entities.