Dear Kiran,
A memorandum of understanding (MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement. It is a more formal alternative to a gentlemen's agreement.
In some cases depending on the exact wording, MoUs can have the binding power of a contract; as a matter of law, contracts do not need to be labeled as such to be legally binding. Whether or not a document constitutes a binding contract depends only on the presence or absence of well-defined legal elements in the text proper of the document (the so-called "four corners"). This can include express disclaimers of legal effect, or failure of the MoU to fulfill the elements required for a valid contract (such as lack of consideration in common law jurisdictions).
Most important is Registration Act nowhere specifies MOU and MOU as per Indian registration Act is a document which cannot be registered. No suit is maintainable before court filed on the basis of MOU. Memorandum of Understanding (MOU) as this term is being used, it has become the most misunderstood term. It is used for relationship varying and oscillating in between non binding to binding nature. However, from legal point of view the term “Memorandum of Understanding"(MOU) should only be used to depict and embody the understanding of the parties in principle without creating any right or obligation of binding nature. In essence, MOU is a simple and pure gentlemen's agreement which does not create any right or duty of binding nature to be enforceable by a Court of law.
