This agreement is signed between service providers and the clients to mutually agree
upon terms and conditions that govern all transactions.
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An MOU is an expression of agreement to continue or proceed. It symbolizes that the parties have reached an agreement and progressing ahead with their business relationship. Although it is not legally binding, it is an earnest declaration that a contract is imminent.
The master service agreement envelopes an entire relationship between the business owner and the client, covering all facets of the agreement that is likely to emerge. Such a contract is an advantage for anyone beginning a long-standing association with a dealer or a client.
A master service agreement promotes a structure to consider and work out terms and requirements. So, the same conditions need not be continuously bargained for deals that are identical or associated with one another.
At a minimum, an MOU must be executed between a recipient and sub-recipient and a third-party service provider which includes the following information.
A MOU (Memorandum of Understanding) is nothing but an agreement executed between 2 or more willing parties, in the format of a formal document. An MoU is not legally binding on the parties. However, it indicates the willingness or intention of the parties involved, to proceed with the contract.
An MoU often defines the purpose and scope of a negotiation and hence, it can be regarded as the beginning point of the said negotiation or talk. More often than not, MOUs are seen in negotiations related to global treaties. They are also seen in business dealings involving high stakes (for example, merger talks).
Concerning MOU in India, several laws govern its functioning. Section 10 of the Indian Contract Act, 1872 lays down the fundamental necessities of a legally binding agreement or contract:
Normally, no stamp duty is levied on Memorandum of Understanding. However, if the MOU consolidates an agreement to purchase fixed property, the worth of stamp duty should be more than Rs 100/- . To produce it in court, it should be stamped.
This arranges evidentiary value and is recognized as evidence in the court of law. If the document is not stamped properly, it will not be admitted as evidence by the court.
Is MOU a Legal Document?
An MOU is not legally binding but it indicates the willingness of the parties to go ahead with a contract. The MOU can be seen as the origin point for negotiations as it describes the scope and purpose of the talks. Such records are most frequently observed in international treaty negotiations but also may be used in high-stakes business dealings such as merger talks. MOU does not constitute a legally enforceable obligation. It is generally applied for a non-binding contract. If an MOU has been drawn for consideration, like for replacement of money, etc., the document would enhance binding on the parties, else it is a non-binding contract.
Who Will Use the MOU Format?
The MOU format for sale of a property is prepared by any business or individual, holding clear title, finalizing the full and final settlement of a sale of a property prior to getting the rights of executing the transfer of title, which are subject to certain conditions of the allotment authority or time restrained. So, the major features of the discussion between parties are laid down in the form of a memorandum of understanding, which involves a simple document or an MOU Format that formalizes the first level of discussion between the parties. Additionally, it will include the common understanding between both parties and serves as a basis for making a formal contract later on.
What is the Process of Drafting an MOU?
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