INTRODUCTION

We have all noticed India signing a memorandum of understanding with many countries on
various subjects. These MOUs are signed to familiarise the two or more parties with the matter
.Memorandum of understanding is called the gentlemen’s agreement. It acts as a set of guidelines
to the two or more parties working towards a common goal. Compared to standard contracts, it is
easier to read. Generally, MOUs are not legally binding, and the parties to the MOUs can dodge
any legal hassles. It indicates the parties ‘s purpose to enter into a formal legal agreement. So
MOUs are resulting from a standard legal contract.MOUs are usually used for international
treaties and big mergers.

WHAT IS THE NEED OF MOUS

MOUs are like the softer version of contracts. They are simple and less complicated compared to
a drafted agreement. It is not time-consuming, and there is no requirement of the terms of the
contract and staunch negotiations. The role of a legal counsel is minimised here because it is a
mutual agreement. The MOUs explain what the parties expect, and if that is agreed, they explain
what they plan to offer and negotiate. The whole point of MOUs is to avoid any legal hassles
before entering into a valid contract

LEGALITY OF MOUS

MOU is an agreement, and it is valid only when it satisfies the Indian Contract Act 1872 and is
enforced by specific Releif Act 1963.MOU will be legally binding the parties’ purpose to
generate a legal relationship between them, and if there is a breach, it would have the same
consequence as that of a breach of contract. MOU becomes a contract only when it satisfies the
following conditions of the contract: offer, acceptance and valid consideration.
The enforceability of legal requirement relies on the contents, the language and the duties and
obligations mentioned in the MOU.MOUs do not create any obligation on the parties, but it can
create obligations based on the contents. The usage of language in MOUs is vital in determining
the need for legal requirements. For example, the use of words like “shall be, would be” can be
binding on the parties. Apart from the express intention of parties, such language can result in the
need for legal procedures. Also, clauses like the indemnification clause, dispute resolution clause
and applicable law clause can make the agreement binding.This is because they create a room for
obligation on the parties to follow what is there in MOU.
.

HOW TO DRAFT A MOU

 Planning phase: Here, the parties communicate their requirements, goals and what they
will negotiate.
 Drafting phase: Then the parties draft the initial MOU
 Negotiating phase: The MOU sets a few rules for the mediation process to start.
 Timeline negotiation: After ending the negotiation process, the parties set up the timeline
for the MOU to take effort, its expiration and when it will be terminated.
 Restrictions: In the end, the parties can add any restrictions, disclaimers, privacy
statements and sign the MOU.

COMPONENTS OF MOU

 Introduction of parties: The format starts with introducing the parties and what business
they have established.
 Duration: this states from which date the MOU commences till which date it is going to
continue, it also includes the terms of extension, alteration, termination of the MOU by
the parties.
 Purpose of the MOU: It indicates the purpose and objectives of the said MOU.
 Reporting: It has to indicate in the MOU as to who will evaluate after it goes in effect and
its adherence to the agreement.
 Signatures: It indicates that any legal person pertaining to the MOU such as the head of
the department, CEO, chairperson or in government matters he head of the country signs
the MOU.
 Confidentiality: while signing the MOU both the parties have access to the sensitive
information and the said parties are obliged not to leak any information, and also
necessary steps are taken to avoid such situations
 Indemnification : If anything happens accidentally or unplanned, then it has to specify
who has to bear the risk. Usually, the indemnification has to be mutual. The parties have
to ensure that there is the actual payment of the losses because a mere amount will

INTERNATIONAL MOU

In international forums, MOUs aren’t binding, and they are indicated to be soft laws.They can be
called as hand-shake diplomatic agreements and often lay the foundation for future partnership.
They aren’t so strict like the rigid rules; however, still ponder the parties’ intention to abide by
the agreement.MOUs are much better than compared to treaties as they have international
consequences in case they are breached.MOUs come under the category of treaties, and they
should be registered in the United Nations Treaty Collection. It majorly depends on the language,
the signatories, i.e., the foreign minister or the country’s head will be considered. Also, the
legality of MOU has been laid down by the International Court of Justice. International MOUs
are signed between two countries for exchanging resources, to lay down big projects, student
exchange programs.

CONCLUSION

Whether you are bound by the MoU or not will depend upon considering the above factors and
the actual terms of the MoU. In particular, the language used in the MoU, which depicts the

intent of the parties will be taken into consideration the most. It is also possible that some parts
of the MoU are upheld to be binding while other parts are not binding.
MOUs can bind you or not depends on the component discussed above, and the language also
indicates whether the parties want to take this further or not. It can be possible that some
elements can be binding and some parts are not. So it is better to establish what the MOU‘s
objectives are and not to leave any doubts. Also, it is crucial to clarify whether the MOU is legally binding or not.