A Memorandum of Understanding, also known as MOU, is an agreement between two or more parties outlining the terms and details of an understanding. This is the first stage to the formation of a formal contract.
This document describes the parties, the project they are embarking on, the purpose of the MOU, general obligations of the parties, each role and responsibility of the parties, etc.
Ordinarily, the MOU is not legally binding (that is parties are not obliged to comply with the provisions of the agreement, however, it indicates an intended common line of action).
However, it can also be legally binding if the parties have a completed bargain which has been settled by all the parties to the MOU. It will also be legally binding if there are all the elements of contract such as offer, acceptance, consideration and intention to create a legal relation as explained below:
In other words, an MOU is either legally binding or not. It all depends on the wordings of the MOU and if all the elements of contract are present in the MOU.
How to use this document
This document can be used at the negotiation stage between parties. This is the stage where parties are deliberating on certain terms of the project. It can be used in cases where parties either do not imply a legal commitment or where the parties can not create a legally enforceable agreement.
After filling this form, all the parties must sign the document. If a party is a company, the common seal of the company must be affixed on the document and either two (2) directors or one (1) director and one (1) company secretary must sign the document. If any of the parties is a person, the person must sign and give one witness to enter their particulars (name, address, occupation of the witness) and sign the document. If one of the parties is a blind or illiterate person (that is can not read or does not understand the import of this document), an interpreter must read the document in the language the party understands and the party must affix his or her thumb print on the document.
The general laws of contract are applicable to this document.
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