THE LEGAL VALIDITY OF MOU IN INDIA

In my previous blogs, I have explained about MOU [better known as MEMORANDUM OF UNDERSTANDING] and how does it work. Also, that a Memorandum of Understanding or "MOU" is used at a variety of places starting from business, divorce, partnership firms, companies, familial relationships, government organisations, between Foreign and Indian Nationals etc.

It is the general notion that a "MOU" is non biding and has got no legal validity in India. In my present blog, I shall discuss about another unanswered question which have had contrasting views and try to discuss each aspect and then conclude and comment upon the validity of "MOU" in India.

The basic stressing areas shall include the following

1. Introduction to the validity of "MOU"

2. Legal position of "MOU" in Indian Law

3. Enforceability of "MOU"

a. In General

b. International "MOU"

c. "MOU" between two countries

4. Landmark Judgments

5. Personal Opinion

6. Conclusion

INTRODUCTION TO THE VALIDITY OF "MOU"

A "MOU" is generally said to be a 'non-binding agreement' which does not have any legal enforceability and thus acts merely as a 'letter of intent' between two parties who mutually agree or disagree to do or not to something and on the basis of which another legally binding instrument is executed keeping all the previous understandings outlined in such "MOU" and giving it effect.

As such we can decipher two things

1. A "MOU" is merely a statement of understanding between two or more parties which when made has no enforceability in the eyes of law as such an agreement has no intention to create a legal bond between such persons. As a result of which, if in case there is a breach of such "MOU" there is no relief.

2. It is a well-established rule of law that – "All contracts are agreements but, all agreements are not contracts". This is so because for a contract to be valid it needs to fulfil all the essential ingredients mentioned u/s 10 of The Indian Contract Act, 1872. One of which is – "an intention to create legal relationship between the parties to such contract". However, now the question arises that what if

A "MOU" is drafted in such a manner that is fulfills all the ingredients of section 10???

Can such a "MOU" be a valid contract and be legally enforceable in a court of law???

Can such a "MOU" compel the other person to oblige to the same and the breach of such "MOU" will be treated similar to that of a breach of contract???

It is also true that 'Nomenclature' of a contract or an agreement is not an index to determine the validity or invalidity of the same. Stating an agreement to be a "MOU" does not explicitly denote that such contract is non-binding.

LEGAL POSITION OF "MOU" IN INDIAN LAW

As mentioned above, now that we can understand the fact that it is not necessary for a "MOU" to be non-binding. The question of whether such a "MOU" is legally binding or not depends upon the intent of the parties to create a legal relationship to that extent.

Therefore, we can say that the legal position of "MOU" in Indian Law depends upon the intent by which such a document is made and thus such an intention of creating a legal relationship by way of such a "MOU" plays a pivotal role in determining the legal position of the same.