A memorandum of understanding is an agreement between two parties that have entered into a specific contract. Sometimes, however, a memorandum of understanding, the terms and conditions between the parties are yet to be negotiated or decided. The memorandum of understanding broadly defines obligations between the parties in the initial discussions. It generally outlines the intentions of the parties before any agreement is officially signed between them. Usually, no specific rights are granted by the memorandum of understanding.
Why Do You Need to Have a Memorandum of Understanding?
A memorandum of understanding typically defines the intentions of the parties. It provides a framework between the parties to avoid potential conflict to work together. It is crucial because it is the initial stage of discussion between the parties and provides the foundation for drafting a formal contract.
What Does a Memorandum of Understanding Generally Cover?
It contains all the important terms and conditions. The following terms and conditions must be included in the memorandum of understanding:
- The relevant information of the parties, including personal details like full names, ages, and the residential interest of the parties involved in the memorandum of understanding.
- The purpose and the goal for which the memorandum of understanding is signed.
- Reporting meetings and plans, if there are any.
- Financial consideration
- The time frame of the memorandum of understanding
- General clauses such as termination of memorandum of understanding applicable laws indemnity clauses within the arbitration clause.
- It should also include the date on which the memorandum of understanding is signed.
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What Are the Documents Required for MOU?
Most of the time, no specific documents are required in order to execute or prepare the memorandum of understanding. But, it is necessary to include ID proofs of each of the parties involved to verify the name and address of the parties that need to be examined. Furthermore, documents proving the party’s rights to carry out the business according to the given memorandum of understanding and provide the service are also subject to scrutiny.
Method to understand the memorandum of understanding
There isn’t a perfect method that can be followed to create a memorandum of understanding. However, once a lawyer has prepared the memorandum of understanding, all parties should carefully and thoroughly review it. All necessary changes must be made, and once a memorandum is finalized, all parties must sign it. All parties must keep a signed copy of the memorandum of understanding.
The legal aspects of the memorandum of understanding
The memorandum of understanding generally is a declaration of understanding about a specific project they want to undertake. If the document only exists as a memorandum of understanding, it’s not possible to decide whether the document is legally binding or not. Both parties’ intentions can be understood based on the agreement’s contents. The legal nature of the understanding mostly depends on the rights, obligations, and duties established between the parties through a memorandum of understanding.
Furthermore, there isn’t any stamp duty to be paid on the memorandum of understanding; however, as per the life memorandum of understanding, it includes any agreement for purchasing an immovable property. If it needs to be presented in court, stamp duty must be paid on it.
Validity of MOU
In India, a Memorandum of Understanding (MOU) does not create legally enforceable obligations and does not affect the legal validity of the MOU in India.
If a Memorandum of Understanding (MoU) is drafted in consideration of the exchange of cash or other goods and services, the document becomes legally binding for the parties involved; otherwise, it will be an agreement that isn’t legally binding.
The language of the MOU, along with the provisions that are considered essential, could be used to discern the parties’ intentions. Several clauses of the agreement carry legally binding effects, for instance, the clause on the jurisdiction, the clause related to applicable law, and the indemnification provision. The legal nature of a memorandum of understanding is determined by the rights, obligations, and obligations it creates between the parties.
Since the vocabulary of an agreement doesn’t need to be considered in the legal context of Indian law, the fact that a document can be described as a memorandum of understanding does not necessarily mean that it’s not a legally enforceable agreement.
The Necessary Legal Paperwork for the Memorandum of Understanding (MOU)
The preparation and execution of the memorandum of understanding don’t require the preparation of any specific document. We’ll ask each party to provide an authentic identification document for review in order to verify the parties’ names and addresses of permanent residents. Furthermore, documents that demonstrate that the parties have the right to carry out the business (as in the MoU) and to provide the service(s) at issue might be inspected.
Legal Aspects to Take Into Account When Drafting a Memorandum of Understanding (MOU)
A Memorandum of Understanding (MOU) typically contains an agreement between two parties about a specific project they plan to undertake. It’s a contract between them on how the project will be executed. The mere existence of an agreement in the format of an MoU is not enough evidence to determine whether the document is a legally binding contract or not. The terms of the MoU could be used to discern the parties’ intentions; thus, the legal status of an MoU is defined by the rights, obligations, and duties created between the parties as a result of this MoU.
In the majority of cases, there is no need to pay stamp duty for an MOU. But, as per the law, the stamp duty must be paid on an MOU for sale of property if it contains a contract for the purchase of immovable property and if it is required to be presented in court. This applies even if the agreement is not utilized to buy real property.
In the end, the memorandum of understanding plays an essential role. It is necessary to understand the document and the draft specifics before making an application for the memorandum of understanding. You can contact your lawyer to assist you with the draft.
