Introduction of MOU:
A memorandum of understanding is an explicit approach between two or more parties. MOU is not common legal phrase indicating that an agreement has been consciously made but they carry a degree, which is a state of being serious and mutual respect, stronger than any gentleman’s agreement. Often, MOU is the first steps towards a legal-binding contract. MOU may be legally binding or may not be but there are few MOU which is enforceable those are in general MOU, international MOU, MOU between two countries. In general, there are two parts one is legally binding another one is non-legally binding. International MOU uses for international treaty purpose and it should be registered. MOU between two countries it is also legally enforceable by the law and its use for the exchange for the resources between the countries.
Meaning of MOU:
MOU means the memorandum of understanding in a simple word, which means a formal agreement with the consent of between two or more parties. Parties may be individuals, two deferent state, or two deferent countries. Memorandum of understanding is not a legal-binding agreement but MOU its carry a degree of seriousness, mutual respect and trust which is stronger than any other legally nonbinding agreement.
MOUs legal position under the Indian law:
According to the Indian contract act, 1872 deals the principles which legislation-governing contract under the Indian law. According to the Indian contract act, 1872 section 10 given the rule how to be a formal agreement can be converted as a legal contract or a valid contract. Section 10 of Indian contract say that ‘All agreement are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void’. We can say that in a simple way, Contract is an intention or wiliness of the parties to enter into a legal binding agreement as that result is the formation of a legal contract. In other, hand MOU making a clause for the parties there includes some obligations and liabilities with the consent of the parties that if any time, any party want to breach the contract than another party can prove that both the party have the intention to enter into a binding agreement.
Difference between MOU and Contract:
Memorandum of understanding is a formal agreement. As per the Indian contract act, 1872 all contract can be an agreement but all agreement cannot be a contract because there is some difference between agreement and contract. Those essential clauses are, to create a contract their need to be legal enforceability in another side in MOU all so enforceability is there but there is no legal enforceability. If parties do not want to engage in legally enforceable agreement, MOU should be drafted sincerely to express their obligations to significant unwanted circumstance.
When MOU can be registered:
Memorandum of understanding can be registered under the Indian contract act 1872. When MOU was drafted that time maintaining all the consequence of legally enforceable elements that need to be satisfied with the legal criteria of a contract. These include:
- Both the parties’ intention should be to create a legal relationship.
- Offer and acceptance of that offer must be there.
- There must be some consideration from both the parties.
- Legal capacity both the party should be major and sound mind.
- The consent provided by the parties it’s should be genuine.
- The objective of the contract should be legal.
- Duration of time period should be mentioned.
Above mention, all elements are satisfied the legal binding contract formation criteria if MOU fulfil
all the elements than MOU may be registered under the Indian registration act.
Can MOU challenged in court:
“YES” MOU maybe challenge in court if MOU fulfils the all-legal contractual obligations than that type of MOU is a legally enforceable agreement by the enforceable law under the Indian contract act. In such kind of MOU if there is a financial consideration a than one of the party breaches the contract than another party under the ‘specific relief act 1963’ party can challenge MOU in court in civil court.
Specific relief act 1963 protects the individual’s civil and contractual rights and provides remedies for whose right have been violated.
If an MOU include clause of dispute resolution than both the party are bound to perform mention the all obligation in the MOU. This clause simple of good faith if in the case in future activities dispute is arises than it shall be resolve in good faith and pleasant manner. If any party after the breach of the contract disagree to obey the clause it can be challengeable in court.
Some Case laws where MOU declared as a legal binding document:
a) Bikram Kishore Parida vs. peculiar Jena
b) Structural waterproofing & Ors.vs. Mr.Amit Gupta
c) M/S. Nanak Builders and investors Pvt. Ltd. Vs. Vindo Kumar Alag
Some case laws where MOU declared as a not legally binding document:
a) Monnet Ispat and Energy Ltd. vs. Union of India and ors
b) Jyoti Brothers vs. Shree Durga Mining Co
Author’s analogises:
As per my supervision, there are various types of Memorandum of Understanding is there some MOU can be a declared as a legal binding document because those MOU fulfil the all contractual obligation in case of one of the party breach the contract they can challenge in court. Another side there is a non-legal binding agreement. This kind of formal agreement based on individual’s good faith a trust value of this kind of agreement is more than gentleman agreement individuals enter this kind of agreement for a short period of time and it is considered as a fast step of the legal binding document. In case of that type of agreement if there is a financial consideration is done and one party breach the MOU another party have that prove than this MOU may be challenged in court.
Conclusion:
Memorandum of understanding if established as a legal binding document than it shall fulfil all essential incidence, which enforceable by the law of section 10 in Indian contract act 1872. More than one party is required to form an MOU. MOU may be registered under the Indian contract act or the law as applicable in India or depending on its contain at the time its creating. If it fulfilled all contractual obligations than MOU is a legally enforceable agreement by the enforceable law. In violation of the MOU, parties can go for the civil court. Or if it’s not legally binding MOU than also if consideration of money is there then also parties may go for the civil court for challenging the MOU.
References:
http://www.legalserviceindia.com/legal/article-709-the-legal-validity-of-mou-in-india.html
https://www.investopedia.com/ask/answers/042315/how-legally-binding-letter-intent.asp
https://www.lexology.com/library/detail.aspx?g=1fdc857f-117a-44fd-99a9-db8a3d17e373
https://www.artslaw.com.au/article/contracts-and-other-forms-of-agreement/
https://blog.ipleaders.in/mou-and-its-enforceability-in-india/
This article is written by Tanvi Acharjee student of B.B.A-LLB(H) 5th-year at The ICFAI University, Tripura
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