MOU - how far legally binding?

Normally, an MOU may be a pre-cursor, or a preliminary understanding between the parties, to enter into a contractual relationship, by way of definitive agreements to be executed later on. Parties may need to prepare themselves, or carry out some spade work before the seeds of a contractual relationship is finally sown. However, even before the definitive agreements are executed, the need, to determine whether the MOU is binding on the parties or not, may arise.

There are divergent view on this, especially by the courts. Some of the important pointers could be:

• The conduct of the parties: where the MOU appears or is purported to be non-binding but the Party(s) have permanently altered their position in assurance of the MOU, it may be interpreted to be binding;
  
• The anture of the transaction contemplated in the MOU;
  
• Any prior relationship or transaction between the parties which are linked to the MOU.
  
• ......etc.
  

It would therefore be prudent for the Parties to declare on the outset whether the MOU is binding or not. Sometimes parties intend to make only certain provisions of the MOU binding upon each other (e.g. confidentiality, dispute resolution, notice, etc.), irrespective of whether the MOU gets translated into a binding contractual relationship.

Hope this helps.

Joy

(Disclaimer: Views expressed above are personal, and is not intended to be any sort of legal advice/opinion.)

MOU brings in contractual obligation between the parties if the language of the MOU suggests so and if breached , damages or specific performance fully enforceable...............it complerey depends on the language which is written in the MOU....

Both of you have told right thing. Thanks joy Day for wide experience and nice legal language.

Thanks Mr. Joshi.

It's "Dey", by the way.

Good advice by Mr. Dey and Mr. Harbola.