Memorandum of Undertaking is basically the agreement done on mutual consent under certain terms and conditions. It is done for business partnership and on agreement of certain contracts.
It also indicates the common line of action between the two parties. It is the beginning step of legal agreement.
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.
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.
1. Agency Information
2. Recipient’s or sub-recipients identification information with points of contact.
3. Service provider’s identifying information with points of contact.
4. The unconditional commitment of third party providers to provide service.
5. Description of services to be provided.
6. Provision of the scope of services.
7. Specific contract to be matched.
8. Duration of the contract.
9. Point-in-time number of clients receiving service.
10. Total clients receiving service over the grant term.
11. Qualification of persons providing service.
12. The estimated value of services provided.
13. Documentation of service match.
14. Documentation requirements, and responsibilities of the service provider and recipient.
15. Standard timelines of the service provider and recipient for providing services to individuals.
1. Pan Card of the Company /LLP or Firm
2. Cancelled Cheque of Applicant
3. Certificate of Incorporation, MOA & AOA
4. PAN Card of All Directors/ Partners
5. Id and Address Proof of All Persons
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:
1. There must be an offer delivered by one party and received by another.
2. The consent of the parties must be free and not affected by fraud, coercion, or undue influence.
3. The parties must be qualified to enter into a contract. This means that they must be more than 18 years old, must be of sane mind, and not considered as insolvent/bankrupt.
4. There must be a lawful consideration.
5. There must be a lawful object.
6. There must be an intention to foster a legal relationship.
An MOU precisely outlines particular points of an agreement. It identifies the parties, explains the project on which they are agreeing, determines its scope, and details each party’s role and responsibilities.
While not legally enforceable, the MOU is an important step because of the time and effort involved in negotiating and drafting an adequate document. To create an MOU, participating parties are required to reach a mutual understanding. In the process, each side receives what is more important to the other before proceeding forward.
In general, each party involved draft its own MoU, with favourable or best-case scenarios. It considers the selected or ideal outcome for the said party. It also includes what the party has to offer to the other party/ parties and the non-negotiable points from its purview. These will be the starting points with which the party goes ahead with the negotiations.
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.