Memorandum of Understanding (MOU)

Record a shared intent or pre-contractual understanding in a clear, well-structured MOU

What is Memorandum of Understanding (MOU)?

An MOU records the shared understanding between two parties before a formal contract is ready. We draft MOUs that are clear about which parts are binding and which are not, protecting your interests during the negotiation period.

A Memorandum of Understanding (MOU) — also called a Letter of Intent (LoI) or Term Sheet in some contexts — is used to record the shared intention of two parties before a detailed contract is negotiated and signed. Common uses include: recording the intent of a business partnership or JV before the full agreement is ready, confirming the agreed terms of a funding round before the legal documentation is finalised, setting out the terms of an MoU with a government agency or public institution, and confirming a distribution or reseller arrangement before the full agreement is drafted. In India, an MOU is governed by the Indian Contract Act, 1872. Its legal effect depends on its language — a carefully drafted MOU can include both binding provisions (e.g., exclusivity, confidentiality, costs) and non-binding statements of intent. Ambiguously drafted MOUs create disputes about whether specific provisions are legally binding. The common mistake is to treat an MOU as inherently non-binding without considering that courts look at the substance of the document, not its label. An MOU that sets out complete, specific, and certain terms may be held to be a binding contract.

Who Needs Memorandum of Understanding (MOU)?

Startups entering into a partnership, JV, or distribution arrangement before the full agreement is ready; companies receiving a term sheet from an investor; businesses engaging with government agencies; and any two parties recording agreed-in-principle terms.

What's Included

Clear delineation of binding provisions (exclusivity, confidentiality, break fee) from non-binding statements of intent
Expiry or long-stop date to prevent indefinite negotiations
Governing law and jurisdiction clause even in an MOU
No-shop or exclusivity period protecting the party who has spent on due diligence
Conditions precedent clearly stated to manage expectations

⚠️ Penalty for Non-Compliance

An ambiguously drafted MOU can be argued to be either fully binding or entirely non-binding. Without explicit binding/non-binding delineation, you may be locked into terms you considered preliminary, or unable to enforce commitments you considered firm.

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How It Works

1
Agree the commercial terms
We help you identify the key agreed terms and which should be immediately binding versus subject to further negotiation.
2
Draft the MOU
The MOU is drafted with clear language distinguishing binding from non-binding provisions, an expiry date, and governing law.
3
Review
Both parties review the MOU. We advise each party on the legal effect of specific provisions.
4
Execution
The MOU is signed by both parties. Binding provisions become immediately enforceable.

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Documents Required

Items marked Required are mandatory; others are situational.

MOU details

Names and addresses of both partiesRequired
Purpose of the MOURequired
Key agreed commercial termsRequired
Binding provisions requiredRequired
Expiry dateRequired

Fees & Pricing

Fees

Government fee

No registration required for most MOUs

Free

Professional fee

Quoted after a brief on the deal and the binding/non-binding structure required

Varies

* Government fees may vary. GST applicable on professional fees. Final pricing confirmed after review.

Frequently Asked Questions

Is an MOU legally binding?

It depends on the language. An MOU can be entirely non-binding, entirely binding, or partly each. Courts in India have held that even documents labelled 'MOU' or 'LoI' are binding if the language is sufficiently certain and evidences an intention to create legal relations.

What is the difference between an MOU, a term sheet, and a LoI?

These terms are used interchangeably in different industries. A term sheet is common in investment contexts. An LoI is common in M&A. An MOU is used for partnerships and government engagements. The legal effect depends on the language, not the label.

Should an MOU include a break fee?

If one party will incur significant due diligence or preparation costs in reliance on the MOU, a break fee (payable if the other party walks away) protects that investment.

What happens when the MOU expires?

The MOU ceases to operate. Any binding provisions that have not been converted into a final agreement stop being enforceable. Including a clear expiry date prevents an MOU from lingering indefinitely.

Is stamp duty required on an MOU?

An MOU that records a binding obligation may require stamp duty in some states depending on the nature and value of the obligation. An entirely non-binding MOU typically does not. We advise on stamp duty requirements for your specific MOU.

Can an MOU be extended?

Yes, by written agreement of both parties before it expires. The extension should be signed and dated.