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Memorandum of Understanding in Business Agreements

Updated: Sep 12, 2020

MoU can be defined as Memorandum of Understanding. It is undertaken when two business parties would like to participate for a business activity in terms of collaboration, product sharing, joint venture, cross selling and platform sharing. It is executed by the parties on a mutual understanding post the agreement on business activity. When business organisations want to enter into a agreement it is essential to have an MoU agreement which will capture the details of the partnership, tasks to be undertaken, remedies in case of liabilities, jurisdiction where the parties can approach for the relief and process for ceasing the contract in case of Force Majeure or by notice period due to failure to carry out the activity.


In terms of Legality regards to the MoU under the Indian Law, Indian Contract Act, 1872 is the principle legislation governing contracts under the system. According to Section 10 of the Act, agreements made by parties, competent to contract under the Act, of their own free will and for a lawful consideration and object are contracts. While the agreement is being drafted by the parties, it is essentially that the duties being carried by the parties are lawful in nature and objects being dealt with don't deal in any unlawful or criminal activity. If the acts are unlawful, then the agreement can be recognized as legal in nature and the parties can't approach the jurisdiction for relief as such. Based on the business agreement, a MoU format would consist of various sections and clauses which prescribe the deal between both the parties. The agreement will cease to come in action on the date it has been signed mutually by both the parties.


Below is the checklist one should ensure are mentioned in the MoU agreement.

1. Name of the parties.

2. Business dealing of the parties

3. Address and details of the registered companies

4. Scope of the partnership

5. Terms of the agreement

6. Intellectual Property Rights

7. Confidentiality

8. Representation and Warranties

9. Law and Jurisdiction

10. Amendment

11. Notice

12. Amendment

13. Limitation of Liability

14. Force Majeure

15. Signature of Authorized Parties.


Note: This is just a sample checklist of which most of the agreement consist of, apart from it other pointers can be added to based on the requirement of the partnership activity.








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