Is MOU legally enforceable like a contract.

Advocate

If a memorandum Of Understanding is executed between parties is it legally enforceable like a Contract?

 
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Advocate-on-Record Supreme Court of India

Dear Querist,

 

A memorandum of understanding may be evidence of an agreement between you and the other party. Many factors will come into play. Did you sign it? Did you agree with it? Are the terms in some way not enforceable? All these questions need to be answered.

 

Generally there is a covenant as to following:

 

A. This Memorandum is not a legally binding contract and under no circumstances does this Memorandum subject either of the Parties to liability for breach, whether material or minor, of contract or any other liability under national or international law or any other applicable law.

 

B. The Parties hereby agree that they are not bound exclusively by this Memorandum and shall be at liberty to enter into any separate agreements or arrangements with any third party without reference to the other Party.

 

Its also in practice that a MOU is followed by a detailed agreement between the parties. This is because, a MOU generally captures briefly the legal parameters and understanding between the parties. Broadly, speaking this a first step taken by parties to have their understanding and the deal contours in place, in a transaction.

With respect to the binding attributes of the MOU, the clauses that the parties intend to make binding under the MOU needs to be specifically stated therein.


Under English law an MoU  is NOT designed to be legally binding. An MoU or as it is also called, a Letter of Intent or Heads of Agreement, are usually designed to note down the pertinent commercial terms for further review and are Subject to Contract. The idea is that they are some comfort to the parties as to what the main commercial agreement is going to be before the parties have got to the formal contract stage. They are NOT a replacement for a Commercial Lease.


Having said that, an MOU can be challenged as to its contractual nature, but there is absolutely no point in putting it in place instead of a formally agreed contract. Or it maybe just an inappropriate usage of the term MOU, just make sure it doesn't have Subject to Contract written on it.

 

The enforceability of the document will depend upon the exact language of the same. Labeling a document "MOU". "letter agreement", "letter of intent" will not, in and of itself, make a document binding or non binding.

 

All the best.

 

Rabin Majumder

Advocate & Attorney

For Nu.Delhi.Law.Fora

New Delhi


Total likes : 1 times

 
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Advocate

Sir, thank you so much for the excellent responds.

 
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Director

I agree with the answer "The enforceability of the document will depend upon the exact language of the same. Labeling a document "MOU". "letter agreement", "letter of intent" will not, in and of itself, make a document binding or non binding". The enforceability depends entirely on the averments and the clauses in the said document and not on the Heading whether MOU, Agreement, Contract etc., So we have to read through the document and then decide.

 
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emerging entrepreneur

dear sir,

this s bharath. i am planning to start a learning solution in india. for that i need to make a tie up with a software company , other training institutes and also with universities.... can u pls explain the formalities to sign a MoU with comapny...

with regards,

bharath

 
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i want citation stating that MOU is an enforceable agreement.

 
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consultant

Intentionality of the parties on mutual consideration is more important than title of the document, however title of the document is also important. find delhi HC jugement FAO (OS) 98/2011 & CM No. 3795/2011 relevant to your query.

 

 
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