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A Memorandum of Understanding (MOU) is a document between two or more parties that explains the proposed agreement between them. It is not legally binding but signals the readiness of the parties to move ahead with a contract. This document is the starting point for negotiations as it defines the scope and purpose of the talks. MOUs are used to measure the intention of the parties involved before any official deal is signed between them. MOU is also known as a ‘letter of intent’. In this blog, you will get an overall understanding of the format of Memorandum of Understanding.
Table of Contents
Individuals and organizations use MOUs in a variety of situations. Some of the important features of the Memorandum of Understanding are as follows:
MOUs have a very distinctive drafting process. Following is
the process of drafting an MOU:
Generally, MOU has no legal binding. However, if there is an
exchange of money, then it may have legal implications. In order to be legally
binding, MOUs must include the following:
Language is the crucial factor that determines whether the MOU is legally binding or not. If the language used in MOU outlines the terms of the offer and is backed by considerations, then MOU will function as a legally enforceable contract. However, if it is clearly mentioned in the Memorandum that “This memorandum is no way a legally enforceable contract between parties mentioned above” there won’t be any legal binding. Therefore the use of language while drafting the format of Memorandum of Understanding becomes important.
The content of the format of Memorandum of understanding includes:
Generally, no stamp duty is payable on MOU. However, if an MOU
incorporates an agreement to buy any immovable property worth more than Rs 100,
it needs to be stamped before producing it in the court. A document on which stamp
duty is paid, it can be admitted as evidence in the court. The document which
is not properly stamped is not accepted as evidence by the court.
MOUs play an essential role in the business world. MOUs
usually do not involve any exchange of money. Generally, MOUs are not legally
binding. However, if there is an exchange of money it is considered as a
legally binding contract.
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