Essentials of a memorandum of understanding

An MOU is a gentleman's agreement. In a memorandum of understanding a set of guidelines are given which governs the parties in agreement, these parties work together for a common goal. A memorandum of understanding is not legally enforceable and the parties can avoid the legal ramification for the same. A legal contract usually follows after a memorandum of understanding and a memorandum of understanding can be usually seen in international treaties and high-stake businesses. A memorandum of understanding defines the roles and responsibilities of the parties who wish to enter a formal agreement, it is a preliminary understanding between the parties to a contract before they execute a formal agreement.

A memorandum of understanding shares some similarities with a normal contract, it is an agreement before a formal agreement, that is why many provisions are found within an MOU, Such as provisions for indemnification, dispute resolution, non-disclosure clause, and so on.

The essentials of a memorandum of understanding include the name of the parties to the agreement and the parties should be described, their organization should also be easily identifiable.

The purpose of the memorandum of understanding needs to be mentioned in it, and there should be a clause defining the purpose of the agreement. The Memo should define how the collaboration benefits each party and what was the intention of the parties. The memorandum of understanding is not perpetual and the exact date of entering the agreement should be mentioned and it should be easily visible. Another essential of an MOU is the duties and responsibilities of the parties of the agreement. Duties and responsibilities mentioned in the memorandum of understanding directly affect the purpose and the interest of the same, so it is usually the lengthiest part of number random. Another essential is confidentiality and this clause for confidentiality mandates the party to stick to the privacy provisions of any transaction which is being made between the parties. The clause for indemnification is also essential in the memorandum of understanding. If there is an indemnification provision it should be mutual. The mechanism for the actual payment of the losses needs to be mentioned in an MOU.

The provisions relating to financial implications must be mentioned separately as the transaction is related to money and it also adds clarity to the memorandum of understanding. The questions related to the obligations of parties concerning payment are answered through this provision.

If there is a need for amendment and alteration, then the parties should agree upon it and the same needs to be mentioned in the memorandum of understanding. For termination a notice. Is to be mentioned in the memorandum of understanding and the same can be agreed upon by the parties concerned in the agreement.

The clause for dispute resolution should be mentioned in the memorandum as an MOU is not legally enforceable unless it is expressly provided in the memorandum.

Then the memorandum of understanding fulfills the conditions of section 10 of the contract act 1872 then the memorandum is treated as a contract and hence it gives it a legal force. So, one can say that whether the memorandum of understanding is legally binding or not depends upon the intent by which such a document is made and whether there was any intention of creating any legal relationship between the parties through the memorandum of understanding. So, when an MOU is generally defined it is said to be a non-binding document.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.