A memorandum of understanding (MOU) is a formal, usually non-binding document between two or more parties who use it to execute definitive agreements. Put simply, MoUs outline terms of a proposed partnership or transaction. This is the reason why MOUs, even though not binding, carry a degree of seriousness and mutual respect. In India, a memorandum of understanding is synonymous to a letter of intent (LOI), which is a non-binding written agreement preceding a binding contract or definitive agreement. MoUs are used to gauge the intention of the transacting parties before a deal is officially signed between them and doesn’t grant either of them any rights. When situations warrant the parties to opt for a softer, non-legal document, parties prefer to execute MoUs over legally binding contracts. MoUs are very handy even in matters where the final deal would depend on the fulfilling of certain conditions. For instance, an MoU could be useful while making a real estate deal. Suppose you have chosen a house that you would like to buy but can only pay for it after six months. In the meantime, you could make a small advance payment and draw up an MoU with the seller stating the terms and conditions from both sides. The house owner may like to include that if you fail to make the full payment within six months, he would have the right to refund your money and sell the house to someone else. However, after six months, when the sale actually takes place, you would need a more concrete document that is legally binding. Here’s where an ‘agreement’ comes in. Agreements are usually executed on a non-judicial stamp paper and are recognized by courts of law. If either party defaults on the conditions stated in the document, the aggrieved party can file a case for breach of contract.
Where can I find a memorandum of understanding sample format?
A memorandum of understanding sample format can be viewed at our document template section. The site provides you with free templates such as a memorandum of understanding sample format and other business documents.