MOU
MEMORANDUM OF UNDERSTANDING
Without the understanding nothing will be achieved in the business when two or more companies do. Every business associated company has their own MOU for their project. For example before initiating a new project L&T company has to sign the MOU to their respective partners for achieving the project without any confusion. This helps the coordination among the individuals. Having MOU which helps to achieve the target with the team.
MOU MEANS :
MOU stands for Memorandum Of Understandings.
MOU is an agreement between the two or more parties who outlines the rights and obligations. In general, it is a formal agreement which gives detail about the plans, scope and purpose of talk or the negotiations between the two or more parties. MOU is also called the Gentleman’s agreement. The MOU is used in the companies for the achievement of the plan by the common goals or for the project achievement by the group. The MOU is used for the situations that the parties who are not legally bound by law or the legal agreements.
REGISTRATION OF THE MOU :
MOU is usually used to build the consensus between the both parties with a view to the future agreement and it is not intended to create the obligations for the parties. It is also known as the letter of intent.
Basically MOU is not a legal binding agreement or a contract. It is not necessary to print in the valued stamp papers or to be legally registered in the appropriate authority. It can be printed on the usual normal letter pad and does not require the authority registration. an MOU is a proposal that is signed by all the parties accepting the mutual intentions. It is a formal document which expresses the intention of the two or more parties in the contract and builds the understanding agreement but not a legal binding agreement.
MOU LEGALLY BIND ?
We already know that MOUs are not legally binding but in some circumstances associate certain clauses that can legally bind the validity of MOU, and also claim liability if any party violates the MOU. The following elements which bring MOU into valid. Those are,
- Offer,
- Acceptance of offer,
- Legal binding intention,
- Consideration.
These following key clauses which are essential for the contract if the parties who violate the MOU shall claim legal actions. The MOU is enforceable under the specific relief Act. If the MOU does not meet the requirements of the contract under Indian Contract Act 1972, the court may declare the MOU as invalid.
TYPES OF MOU :
1. Technical MOU :
The Technical MOU is used for the company or the person who proposes all the activities such as Technical knowledge, strategies, mechanisms and expertise details should be included. Generally these technical MOUs are used by software companies, invention companies disclosing the technological aspects to their team or the group.
2. Financial MOU :
The financial MOU which contains all the budget segments such as loan, investment, funding and shares which were provided or contributed by the parties for the company or for the association or for the business.
3. Specific MOU :
The specific MOU is used for the specific purposes between the two parties or between the two companies especially for the particular purposes of projects, the collaboration of them. It generally specified the assigned work.
4. Partnership MOU :
The partnership MOU is drafted when the partners themselves assign a specific purpose and draft the MOU with the terms and conditions for the specific time period. In this MOU the partners should amend the terms and conditions in the specific business.
5. Non-Disclosure MOU :
It contains highly confidential matters such as the secrets and non-disclosure of company information. In this MOU the selected parties enter into the agreement. There are certain legal clauses that should be used in non-disclosure MOU.
ADVANTAGES OF MOU :
- The MOU which helps to establish the mutual intentions of both parties.
- MOU is used as a record or proof that has been used to negotiate in case of any disputes.
- MOU which brings the common understanding and is highly used to prevent the disagreement between the parties.
- MOU which outlines all the requirements, terms and conditions and contract between the parties which forms a goal.
DISADVANTAGES OF MOU :
The main disadvantages of MOU are not legally binding by law. So if any of the party shall act beyond MOU should not claim the legal actions. It allows The party to exit the agreement at any time. The language is ambiguous which causes misunderstanding for the parties. These are the main disadvantages of MOU.
ESSENTIAL ELEMENTS OF MOU :
There are certain essential elements required for the creation of the MOU.
Parties : It should mention all the names of the parties who are entered in the business or the common understanding and their role in MOU.
Purposes : The purposes which include that specific authorities have the specific goal and also the common goals for the MOU which includes terms and conditions, plans and responsibilities for the common goal.
Durations : It is one of the important things that the memorandum should specify the duration period of the agreement both the entering date and ending dates should be mentioned clearly. It also states the termination period.
Meetings and coordinations : The meetings such as general meetings, monthly or quarterly meetings should be described in the agreement with the mentioned period. MOU also specifies the team coordination for the common goals. The parties at least coordinate or conduct meetings once a quarter.
Financial Consideration : The agreement should mention all the financial considerations such as amount of money or the capital by the parties for the contributions of the goal. The financial records should be maintained by the appropriate authority for the future accounting.
Management : The agreement which contains all the roles, responsibilities, managing activities among themself. If the Legal clauses are associated in the agreement, it should be mentioned in the MOU clearly.
Signature : Once the MOU is prepared, all the parties involved in the agreement need to sign with the date. Before signing the agreement every party should know the terms and conditions, role and their positions in the organisation clearly.
PARTIES FOR THE AGREEMENT OF MOU :
There are three kinds of parties entered into the MOU.
Signatory party : The party which includes the individual, company, governmental organisation, private institutions who come together for the association of work are considered as the signatory party or the primary individual.
Witnesses : The witnesses are the important parties who witness the signing agreements. For every MOU witnesses are essential for the validation of the agreement in the situation of the Negotiations.
Supporting Parties : The supporting parties are the parties who are responsible for the success of the work or the project or the business which is done by the group.
USES OF MOU :
Private sectors or enterprises : In the private sectors the MOU generally serves as the non binding agreement between the parties which contains the responsibilities, terms and conditions without the establishment of the formal contract or not a binding agreement by law.
Public and governmental activities : The MOU is also used in the governmental organisations and public sectors for achieving common goals, which plays an important role to manage all the plans and discussion properly without bound by law and specifies the view of organisations outcomes.
CHARACTERISTICS OF MOU :
- It provides clarity on the terms and conditions of both parties and acts transparency.
- It does not need to register for the legal enforcement although it can be legally valued in the court.
- It can be legally amended and fixed at any time.
- It promotes good relationships between individuals and companies.
- It is cost savings that less expenses are needed for the drafting of an MOU.
These are the certain special characteristics of the MOU.
DIFFERENCE BETWEEN MOU AND MOA :
MOU which means Memorandum Of Understanding. It is a general agreement which covers the plans, discussions without creating the financial obligations. It connects the group or peoples, members intended for the long term. It is not legally bound by law.
MOA which stands for the Memorandum Of Association. It is a specific agreement. That involves the financial arrangement, proposal of the company, shareholders, financial assessments, terms and conditions of the institutions. MOA is legal documents and the parties themself responsible for the agreement. It is also called the conditional agreement.
FAQ
FAQ ON MEMORANDUM OF UNDERSTANDING :
1. WHAT IS THE REGISTRATION OF THE MOU ?
Basically MOU is not a legal binding agreement or a contract. It is not necessary to print in the valued stamp papers or to be legally registered in the appropriate authority. It can be printed on the usual normal letter pad and does not require the authority registration. It is a proposal that is signed by all the parties accepting the mutual intentions.
2. WHEN MOU IS LEGALLY BIND BY LAW ?
The following elements which bring MOU into valid. Those are,
- Offer,
- Acceptance of offer,
- Legal binding intention,
- Consideration.
These following key clauses which are essential for the contract if the parties who violate the MOU shall claim legal actions. The MOU is enforceable under the specific relief Act.
3. WHAT ARE THE CHARACTERISTICS OF MOU ?
- It provides clarity on the terms and conditions of both parties and acts transparency.
- It does not need to register for the legal enforcement although it can be legally valued in the court.
- It can be legally amended and fixed at any time.
- It promotes good relationships between individuals and companies.
- It is cost savings that less expenses are needed for the drafting of an MOU.
These are the certain special characteristics of the MOU.
4. WHAT ARE THE REGISTRATION OF THE MOU ?
Basically MOU is not a legal binding agreement or a contract. It is not necessary to print in the valued stamp papers or to be legally registered in the appropriate authority. It can be printed on the usual normal letter pad and does not require the authority registration. It is a proposal that is signed by all the parties accepting the mutual intentions. It is a formal document which expresses the intention of the two or more parties in the contract and builds the understanding agreement but not a legal binding agreement.
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