With the aforesaid, we can now understand that the MOU can be termed as an commencement of negotiations, as it defines the scope and purpose of the intended binding agreement, as business parties use MOUs to set forth their understanding and expectations with regard to the specific performances of either parties in the contemplated agreement. It is possibly one of the widely used documents in world of commerce and economics, yet the most misunderstood. It however plays an important role by allowing the parties involved to devise and formulate the clauses of the intended binding agreements. A MOU is at best a guiding document for the development of future binding contract.

Though it is generally not legally binding, but it implies the intention of an impending contract in future. First things first, let’s get to understand the definition MOU – Memorandum of Understanding:Ī memorandum of understanding ( MOU ) is an agreement between two or more parties drafted in a formal document which sets forth their understanding about a future engagement amongst them. Now that we have arrived at the conflux of the Interpretation and MOU, it’s time to plunge into the essence of it. If a document per se, titled as a MOU fulfills all the conditions laid down U/s 10 of the Indian Contract Act, 1872 then, such a MOU should be treated as a contract as defined in section 2(h) of The Indian Contract Act, 1872. Exactly how naming an agreement or a contract as a MOU wont effect its enforceability in law. “What’s in a name, a rose by any other name would smell as sweet? ” is a popular reference to William Shakespeare’s play Romeo and Juliet. Precisely, how the intent of the words with which a MOU is drafted defines its very definition and further its validity in the eyes of the law.

Mou example