Do you want to know more about the Memorandum of Understanding (MoU)? You will find all the essential information in this guide from its overview, types, and legality. Read to learn more about the ‘Memorandum of Understanding: deal or no deal?’
Legality of MoU: The Memorandum of Understanding (MoU) is a negotiated agreement among two or more people, and it could also include two or more countries signing an agreement. The MoU is an agreement signed before parties sign any future business agreements. It’s more of an agreement between two parties, where they share several agreed-upon points of understanding, and they don’t disclose or violate any of the conditions stipulated in the memorandum of understanding. It is a scenario where nations come to a common measure. If the parties reach an agreement, they engage in further negotiations and discussions. They enter into a contract if the discussions and negotiations are successful. The MoU Online is usually used as part of international relations, and however, it is also used frequently in business contracts. This blog answers the the question if the legality of MoU.
Legality of MoU : Does an MOU Constitute a Legal Document?
The validity of a memorandum of agreement is a legally binding contract that depends on the wording and content of the agreement. It’s not as important what you name the agreement, but more crucial is what the conditions of the agreement are.
If you don’t want your MOU to become legally binding, both parties must be on the same page regarding this. MOUs that do not have the legal status of binding typically contain words to state that they are not legally binding expressly. The memorandum of understanding could state ‘non-binding’or ‘subject to the formal contract.’ If the parties state in the beginning that the document doesn’t have any binding force, it will help you stay clear of legal trouble in case one of the parties needs to withdraw. However, it will be a bit more difficult if the memorandum of understanding consists of all the terms of a formal agreement without any specific language indicating it’s legally binding.
Be cautious about signing a document if the parties aren’t in agreement regarding the terms of the agreement. When you agree to a contract without clarifying that it’s not legally binding, the other party may take legal action if you withdraw.It doesn’t matter if you call it an memorandum of understanding, and it may not be relevant. Although MOUs are generally legal, they bring a certain degree of seriousness. The parties generally indicate that they’re serious about the matter and that other parties are expecting them to stick to their commitments.
Types of the Agreement
A contract is simpler than an MOU. After an offer has been made by one side and accepted by the other party, the agreement becomes a legally binding agreement that both parties have agreed on. If any parties fail to honor their obligations under the agreement, the other party could bring him before a judge to claim compensation.
There are various kinds of agreements, which include:
- Express Agreements: Express agreements are agreements that expressly define the goals of everyone in the contract.
- Executory agreements: Executory agreements are contracts that haven’t yet been executed but are believed to be fulfilled later.
- Conditional agreements: Conditional agreements can only be enforced after the conditions of previous agreements have been fulfilled.
- Void agreements: These are contracts that are not legally binding. They are not invalid at first, but they eventually will be void due to any change that alters the conditions in the document.
- Voidable agreements: A voidable contract is distinct from a void one in that a voidable agreement is an actual contract that may be either affirmed or rejected by a person who is a party to the contract. If one party decides to reject the contract, the voidable agreement is deemed to be an unenforceable agreement.
- Executed agreements: A legally executed agreement was signed by all parties involved. These signatures are required to allow the agreement to be effective.
- Implied agreements: Implied agreements are agreements interpreted through an agreement between the parties instead of writing down or verbally stating the conditions of an agreement.
The main distinction between an memorandum of understanding and an agreement is that the parties generally opt for an MOU when they aren’t interested in involving a court in their business.
The agreement is signed with the explicit intention of having the other party taken to court in case the other party fails to comply with the contract’s provisions in any manner.
The Enforceability of the MOU
Different courts have issued several judgments in India regarding the enforceability and validity of MOUs. The Calcutta High Court ruled that a contract to enter within a legal contract is unenforceable and ineffective from the law’s perspective. But the court will be relying on the importance of this understanding to the parties and the fact that no party has taken action upon the basis of such agreement’.
In a different, contradictory decision in a different case, the Supreme Court has held that the fact that parties refer to the agreement’s preparation by which the terms and conditions agreed upon are to be put in somewhat more formal shape doesn’t prevent a binding contract’s existence. In addition, the Supreme Court also held that ‘if the conditions of the MOU are not otherwise agreed on, the parties to the MOU will be entitled to the benefits that result from the agreement. The heading doesn’t define the content of the memorandum of understanding. However, it is determined by the content written. The mere existence of a heading or a title for documents can’t deprive documents of their true nature.
What are the Advantages and Disadvantages of a MoU?
Pros
- The main advantage of an memorandum of understanding is that it allows parties who plan to enter into business together and lets the parties express their intentions without signing a legally binding contract.
- If one party is wary of engaging in negotiations or discussions that don’t have any effect, the memorandum of understanding could be a sign for both sides to show they’re committed to the same goal. MOUs also offer a degree of flexibility.
- There are times when two organizations would like to collaborate, however, without the legal responsibilities which come from a formal contract. MOUs can be beneficial to the international community, too.
- Although signing a treaty may be lengthy, signing an MOU helps nations agree on specific conditions without jumping through hurdles when signing an agreement.
Cons
There are some disadvantages associated with signing an MOU, too. One of the most common arguments against MOUs is that they aren’t legally binding. Therefore, while the parties to an memorandum of understanding may want to enter into formal agreements, it’s only the initial step. It is still possible to rescind or modify the conditions in the agreement.
Conclusion – Legality of MoU
When a couple is engaged, they’ve stated that they will tie the knot. They’ve not been married; however, they’ve planned their wedding ceremony and sent out invitations. All they have to do is confirm the marriage and then make it legally binding. MOUs are like marriage contracts in that they’re usually not legally binding. However, they signify to both that the couple (or, we say, parties) is set for the next step. We hope now you know the Legality of MoU!
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