Difference between MOU and Contract

Dear Readers,

MOU is a common term and we hear about it frequently in our work life. Business Entities and Central/State Governments regularly draft/sign MOU’s to records the mutual promises and understanding of the parties. Also, they keep on referring/interpreting existing MOU to know the respective duties of parties. So what is the relevance of this document and how it is different from a Contract ? In this post, we will discuss the meaning & significance of MOU and its relationship with Contact

In this post we are going to discuss briefly the followings topics;

  1. What is a Memorandum of Understanding
  2. Difference between Memorandum of Understanding and Contract

1) What is a Memorandum of Understanding

The word memorandum means: a written message or a written note or a written report prepared for future use by parties or intended recipients. The term understanding means: agreement or mutual consent or in depth knowledge of a subject matter. Understanding is said to be reached when both parties agree something in the same sense (meeting of mind) and have full clarity of their own and each other’s promises

From the above, we can define Memorandum of Understanding as a written document describing an understanding and/or agreement between two or more parties. Parties signing the MOU assures each other to act as per agreed terms but do not intend to be legally bound for such terms. So, MOU expresses the promises made by the parties to achieve a common goal but such promises are not enforceable by the Law. Hence, MOU seems to be a more formal alternative to gentlemen’s agreement, but, lacks the binding power of a contract

If you wish to read what is a Contract and/or Agreement, please click on below link

http://www.rkstrainings.com/what-is-a-contract/

http://www.rkstrainings.com/agreement-meaning-and-definition/

2) Difference between MOU and Contract

 

Above points demonstrate how MOU is different from a Contract

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