Last revision: 27-02-2023
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This Memorandum of Understanding is for use between two or more Parties that are interested in working together on a particular project. It is intended as a starting point for the Parties, as it enables them to set out the preliminary understanding between one another and can help them to work towards a more formal agreement.
This Memorandum can be chosen to be legally binding or non-binding. In the first case, the Memorandum acts as a general agreement between the Parties which covers the broad understanding of the Parties. Often, Parties may sign a Memorandum of Understanding outlining some general agreement, and then will go away and make some further investigations before working out the finer details. If it is chosen to be non-binding, the Parties may not actually be legally obliged to comply with it. This is because in many cases, Parties may not actually be certain about the specific terms which they can agree to, but they still find it beneficial to put something in writing, outlining some broader goals (such as the general nature of the project), and confirming that they will act in good faith in pursuit of those goals.
Further, even in the case of Memorandums which are non-binding, parties may choose to have the obligations on confidentiality as binding since they may be sharing sensitive and confidential information with the other parties in order to enable them to carry out further investigations or due diligence before finalizing all the details of the Project. In case, the Memorandum is non-binding, the parties may also choose to sign a separate confidentiality agreement that is binding.
How to use this document?
This Memorandum may be used early in the negotiations between the Parties. In some cases, parties may also use this as the final agreement, however in some cases, a more detailed specific contract may be more suitable.
Record the details of each Party, and the Project that they are interested in pursuing. If the Parties have specific responsibilities in relation to the Project, then the details of those responsibilities can be included as well. For example, if one Party is going to obtain information about relevant costings for the Project, while another Party will obtain information about appropriate marketing strategies, then these responsibilities can be described in the document.
Once the Memorandum has been completed, and if it is a binding document, it should be printed on non-judicial stamp paper or e-stamp paper and signed by all the parties to the Memorandum and dated. The value of the stamp paper would depend on the state in which it is executed. Each state in India has provisions in respect of the amount of stamp duty payable on such agreements. Information regarding the stamp duty payable can be found on the State government websites. For instance, the website of the state of Karnataka provides details of stamp duty payable on agreements, as does the website of Delhi. Each Party signing may have their signature witnessed by an independent adult and then keep a copy of the Memorandum for their own reference.
The Memorandum may then be used as a point of reference to guide the negotiations as the Parties move forward towards a final agreement. The Memorandum can be made binding or non-binding on the Parties, as they may agree. If a more detailed contract is required, consider some of our other available templates, including:
If the Memorandum is binding, the principles of contract law and the Contract Act, 1872 will apply to it.
If the Memorandum is not legally binding, there is no law that directly applies to it. However, ordinary principles of contract law, as provided by common law, may be applied in interpreting, and understanding the agreement between the Parties.
In the event that a Party acts in bad faith, causing another Party to suffer loss, then general principles of equity, estoppel, or laws dealing with misleading and deceptive conduct may become relevant.
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Other names for the document: MOU, Memorandum of Understanding (Binding), Memorandum of Understanding (Non-Binding), MOU (Non-Binding), Memo of Understanding