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 Memorandum of Understanding (MoU)

A Memorandum of understanding (MoU) is a record in which two or more than two parties agreed upon that they will perform on one direction or function for their business. MoU is legally non-binding document, does indicate a voluntary agreement or Agreement to agree. MoU is written agreement which indicating that later it will include in a formal contract. It outlines the line of action keeping in view the roles and responsibilities of intended parties. It describes the intent & contribution of parties towards a project within a time frame which forms the basis for future contact.

It is generally a document of relationship of goodwill between the parties. It describes the intent & contribution of parties towards a project within a time frame which forms the basis for future contact. MoU is also known as ‘letter of intent’. If MoU drafted for consideration, like any transaction related to money, the document becomes binding. Else MoU is non-binding agreement.  

    Essentials in Memorandum of Understanding:

    • Identification of Parties
    • Objective
    • Time frame

     

    • Contribution
    • Consideration
    • Obligations
    • Stamp & Sign

     

    Validity and Termination 

    • MoU came into force on the date when the notification later exchanged between the parties the MoU is valid for a period of five years and automatically renewed for similar five years. 
    • Termination of MoU is not affect the completion, for termination one party should notify the other 6 months prior to its expiry date about its intentions. 
    • The MoU is amended with the consent of the parties at anytime through an exchange of written note

    Features of MoU

    • Determine the name and details information about the parties whom it may concern
    • The purpose to sign the memorandum of understanding should be mentioned
    • Specify the amount of capital contribution in MoU
    • The memorandum of undertaking should specify the duration of MoU i.e. commencement and completion date
    • It should mention and specify all the necessary information which are mandatory to represent in the MoUs

    Benefits of MoU

    • Decrease the misunderstanding and future conflicts
    • Provide additional partners to join and expand the partnership
    • It can be useful while making the real estate agreements

     Power of Attorney

    A Power of attorney is a written legal document by which one person authorises or permits another person to act or represent on behalf. The person who authorises or permits to act on his/her behalf is known as Principal or Grantor. And, the person to whom authorisation or permission to act is granted is known as Agent or Lawyer.

    Usually, Power of Attorney is executed in matters related to property, business activities, taxation and other legal proceedings due to certain reasons which may include non-availability of authoriser or technical incapacity. Mainly, there are two types of PoA, General Power of Attorney and Special Power of Attorney. Power of Attorney expires at the given date, or act for which power is grated is done or at any time if its revoked by authoriser/grantor of the power. Durable Power of Attorney which is special PoA remains valid even after metal incompetence due to accident or illness or death of the principal.

    Essentials in Power of Attorney:

    • Name, age, occupation and address of Principal/Grantor
    • Name, age, occupation and address of Agent/Lawyer
    • Legal valid cause for authorisation of power
    • Area, scope and duration of the authorisation
    • Date and Place of granting PoA

     Franchise Agreement

    A Franchise Agreement is contact between parties in which one grants the right to use its business resources and system to another for consideration under agreed terms and conditions. The business which grants the right to use its brand is called Franchisor and to whom authorisation is called Franchisee. Franchisee model differs from business to business and it can be customised as per interests of parties

     

    Essentials of Franchise Agreement:

    • Name, address and organisation status of the franchisor
    • Name, address and organisation status of franchisee
    • Ownership of brand as well as business rights
    • Objective and duration of the agreement
    • Territory limitationFranchisee fee
    • Royalty
    • Franchisor assistance and support
    • Roles and responsibilities

    • Advertisement and marketing
    • Confidentiality of trade secrets
    • Indemnification and Non-compete clause
    • Performance Guarantee
    • Renewal and termination policy
    • Dispute resolution mechanism
    • Governing Laws
    • Other Provisions

     Shareholder Agreement

    A shareholders’ agreement is an agreement between the shareholders of the company in which they decide the management, structure, directors, operate the policies of the company, their rights and obligations and the protection of the shareholders. They decide how the work will be conducted in the company. Primary reason for entering into a shareholders agreement is to dissolve the dispute between the shareholders and the company.

    Benefits of shareholder agreement

    • It helps to dissolve the disputes arisen between the shareholder and the company
    • It can be used to secure the position of minor shareholders
    • It can provide privacy of the company unlike MoA & AoA which should shown in the house of company
    • It can regulate the appointment and removal of directors

       Independent Contractor Agreement

      An independent contractor are engaged in a contracted agreement for a particular service or task completed. It could be constituted for daily, a week or hourly amount which may end on a specific date or a total amount to be paid after completion of work. Independent contractor agreement defines the relationship between the company and the independent contractor. Agreement protects both the company and independent contractor. Independent contractor also called consultants, freelancers, self-employed and sometimes entrepreneurs or business owners.  

      Benefits of independent contractor agreement 

      • A written document may avoid disputes arising in the future between the company or independent contractor
      • An agreement may specify the independent contractor agreement relationship between the contractor and company, not an employee-employer relationship  

      Contract extension of agreement

      Contract extension agreement or an extension of agreement is used when date of expiry of contract is near and applicant wants to continue the contract. An extension of agreement is used to increase the period of existing contract. From drafting the whole new contract or contract amendment document it is way simpler to go with extension agreement for continuation of contract. The only thing is to be change under extension of agreement is extend the date and sign by the involved parties. 

      Reasons for implementation of extension of agreement 

      • The contracting party wants to continue the working relationship between them. 
      •  The contracting party wants to extend the expiry date along with that change the terms and conditions.

       

       Key points to remember 

      • The initial date of the contract
      • Name and contact of the existing parties
      • The existing date and expiry date of the contract
      • The new expiry date of the contract
      • Any information which is change along with the extension of the date

      FAQ

      What is shareholders agreement ?

      Shareholders agreement is an agreement between the shareholders of the company. It may protect the rights and solve any dispute related to shareholders of the company.

      Buy/sell agreement is same as shareholders agreement?

      No, shareholders agreement is not same as buy/sell agreement. A shareholders agreement may cover buy/sell agreement or it may come under the shareholder agreement. But the main motive of shareholder agreement is to control the company.

      What do you mean by MoU ?

      MoU stands for Memorandum of Undertaking. The primary motive is that the parties reached the decision. It is a record in which two or more than two parties agreed upon that they will perform on one direction or function for their business.

      Can MoU is legally binding ?

      MoU is non-binding legal document which does not constitute a legal obligation. MoU is non-binding contract but it became binding when the contract is for consideration that means transaction involve money.

      Why companies should have shareholder agreement?

      Companies should have shareholder agreement because no legal responsibility for having shareholder agreement but companies advise to have shareholder agreement.

      Why companies should have shareholder agreement ?

      Companies should have shareholder agreement because no legal responsibility for having shareholder agreement but companies advise to have shareholder agreement.

      What happens if there is any breach of shareholder agreement ?

      If any of the shareholder breach the shareholder agreement, then other can file breach of contract against the shareholder.

      Difference between MoU and agreement ?

      In memorandum of undertaking, both the parties agreed upon intention and a commitment to follow the intention in future. MoU is non-binding in nature. It is not a valid contract and it cannot be made enforceable but the MoU parties are bound by estoppel.

      Similarly, An agreement is made between the parties for achieving a common objective. agreement is binding upon the parties. It is enforceable by law, parties can go to court if any breach arisen by any party and get it enforced.

      How much limit is for using MoU ?

      There is no limit for using an MoU. More than one person can use the MoU.

      What happens if there is any breach of shareholder agreement?

      If any of the shareholder breach the shareholder agreement, then other can file breach of contract against the shareholder.