Home Tax & Compliance Memorandum of Understanding (MOU) Drafting

Memorandum of Understanding (MOU) Drafting

MOU basically stands for Memorandum of Understanding. It is an official agreement that is formed between business acquaintances or companies for creating an official relationship between them. This is an indication that the business entities have reached a point of agreement and that they have built-in a business relationship that is being furthered. The MOU is not a legally binding contract but should be considered as a declaration.

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Overview of Memorandum of Understanding

MOU, despite not being a legally binding contract, is a formal document that holds the power and importance to hold the parties committed to the objectives and expectations set. It shows the intention or the interest of the parties involved in staying binding and continuing with the terms and conditions as set in the agreement.

Coming to the Laws in force in the country of India, we can utilize section 10 of the Indian Contract Act for forming the MOU as this section lays down certain basic elements or necessities to be met while drafting a legally binding agreement or a contract:

The first one in this is the making of an offer which should be received by the other party to the agreement or the acceptance of the same
The consent expressed by the parties involved should be free from any push coercion or usage of undue influence
The parties who have come into the agreement should legally hold the capacity to form an agreement or contract. Say, the attaining of the age of majority which is 18 years in India.
There should also be a consideration that is lawful and legal.
There should also be an object which is legal and lawful
The intention to have a legal relationship is also important.

In the case of an MOU in India, stamp work is not required unless and until it involves the purchasing of immovable property worth more than INR 100 and a requirement of presenting the same in court.

Requirements for an MOU

The following information should be included in the MOU without a failure:

Information about the Agency involved
The identification information of the recipient or the sub-recipient, along with the points of the contract
The identification information of the service provider, along with the points of the contract
The list and description of the services which are agreed to be provided
The scope of services described duly
Matching of the specific contract
Time duration of the contract or agreement as agreed upon
Clients who are receiving the service on a point-in-time basis
Details of the total clients who are receiving the services as per agreement
The qualification details of the personnel who are providing such agree-upon services
The value of the services provided on an estimated basis
The service match documentation
requirements and responsibilities of the service provider and the recipient with respect to the documentation
Timelines which are set on a standard basis for the rendering of services to the individuals or the parties to the agreement
Clauses for confidentiality, indemnity, severability, and arbitration should also be included
Any specific conditions which would result in the termination of the MOU in India formed between the parties should also be included.

Advantages of an MOU

There are certain advantages or benefits which are provided by the MOU to the entities and persons using the same. And some of these are discussed below for an understanding of why MOU should be made or adopted:

It helps in creating a common intention between the parties of the business relationship as these are different parties and also have different goals and objectives set. Due to this MOU in India acts as an asset and also a highly beneficial element making the communication effective, clear, and unambiguous. It will make the dealing between each other easy and simple.
The MOU also reduces any risk of uncertainty. Negotiations, particularly business negotiations, can be uncertain and difficult. There can occur disagreements on various terms and rules of the agreement between the parties. So, MOU can be utilized to reduce the risk or the uncertainty, which can come up with the objectives and also the expectations set.
It serves as the recording of the prior agreements which were formed by the parties to the agreement or the MOU in India. Though the MOU is not a legally binding contract, it keeps a record of the agreements that were reached between the business entities before, such that all the objectives of the dealing and the expectations are recorded as they were agreed upon.
The MOU provides ease in ending the engagements. It acts as the point of starting of an agreement formed by the parties to an agreement, stating what each of the parties is expecting out of the arrangement, and similarly, if they would want to exit such arrangement or agreement there should again be a properly set procedure available for the same, which otherwise would become time-consuming and also expensive.
This acts as a framework for any future dealings coming your way and also one providing clarity of any objectives involved or expectations being served. It also helps in resolving any confusion arising or difficulties being faced during the carrying out of the agreement and the terms as agreed upon.
MOU helps in securing the partnership between the parties involved in the same which mostly would be the owner and the client. It covers all the likely points within the agreement or contract and helps in securing a long-term relationship and all the facets associated with the same.
It also saves major time for the parties involved in resolving issues explaining terms or what is to be done, and bringing clarity with regard to the objectives and expectations involved, as this is clearly stated in the MOU. The procedure for exiting the agreement and its arrangements will also be provided by MOU, saving time again.

Our Role

We have onboard some of the best in market experts for drafting the MOU just the way you want or even more with all the loopholes closed and stating with clarity the expectations and objectives of the MOU agreement between you and the client or the vendor or the dealer or who ever you are dealing with. Just put in your enquiry or follow the procedure to sit back and get your service done with.