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rangnath.kulkarni (nil)     13 April 2022

cancelling MOU before time of exit.

Is it possible to terminate MOU if one of the parties to MOU wishes to exit.?


 4 Replies

Shubham Bhardwaj (Advocate)     13 April 2022

Dear Sir, 

That would depend on the type of transaction and the wordings of the MOU. I ll give you an example. If one of the party has invested heavily for the trsnaction, the equity lies in his favour. In such a case, the other party cannot terminate the agreement at the drop of the hat. Since you have not provided any facts, it is not possible for me to answer any further.



Shubham Bhardwaj (Advocate)

District & Session Court, Chandigarh

Punjab & Haryana High Court, at Chandigarh


Disclaimer:- Opinion in only for guidance.

Supinder Singh   13 April 2022

The answer to your question would depend upon - Whether your MOU is legally binding on the parties or not.

In the case of Jai Beverages Pvt. Ltd. v. State of Jammu and Kashmir (2006 Latest Caselaw 305 SC), the Hon'ble Supreme Court has held that if a MOU is in a formal shape and if the parties benefit from acting in accordance with the terms listed out in the MOU, it can be considered as a legally binding agreement.

The basic thumbrule is that a MOU is a agreement, and it is considered as legally binding if the parties intended to create a legal relationship through it.

So, in your case, if the parties to the MoU had an intention to create a legal relationship and the language of your MoU shows that, then you cannot terminate it without repurcussions, unless you have a valid reason for terminating it according to the Indian Contract Act, 1872. You can terminate it even if there is an 'exit clause' in the MoU.

P. Venu (Advocate)     13 April 2022

You have not posted the relevant facts.

Kishor Mehta (CEO)     14 April 2022

A legal MOU cannot be unilaterally altered or cancelled. 

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