Though an MoU is not legally valid, the other person may manipulate it to harass you. If the MoU is to be annulled after the completion of a certain task or event, it should be clearly stated. “Another mistake people make is in not including a termination clause in the MoU,” says Goenka. For instance, if you have signed an MoU to give your house to a builder for redevelopment, make sure it does not grant him the right to pull down the property before a final agreement has been drawn. Moreover, in the case of non-binding MoUs, avoid granting a freehand to the other party. However, be warned that you cannot get the MoU enforced,” says Ghazala Khatri, head of legal at Warmond Trustees & Executors. “If the other party violates the MoU and you sustain a loss because of it, you could use the document to try and recover the money stating that the wrongdoer had agreed to the conditions. A non-binding MoU can only be used to show that the other party had agreed to the conditions, but it cannot be used to bring him to book. If anything goes wrong or the other party violates the terms and conditions, you will have no legal recourse or even any body/organisation that could help you with your grievance. Precautions while drafting an MoU Since an MoU cannot be legally enforced, you need to be careful while drafting it. This is why an unregistered MoU has hardly any importance in real estate, and why everyone opts for a notarised agreement, even if it is just to lease out a house for 11 months. In situations where registered documents are mandatory, no amount of legal jargon would make an MoU stand up in a court of law. However, don’t assume that just because you put the word ‘binding’ in an MoU, it will become legally enforceable. “If an MoU has been drawn for consideration, that is, exchange of money, the document would become binding on the parties,” says Ravi Goenka, advocate, Goenka Law Associates. This is true in case of a deal related to a monetary transaction. So, an MoU could also be legally binding depending on the reason for which it has been drafted. Exceptions to the rule However, there are certain exceptions when it comes to the legal validity of an MoU because documentation can become complicated depending on the situation and type of deal. The pre-nuptial contract will be null and void. So, if marriage doesn’t work out, the couple will have to go to court for a divorce and their combined wealth will be divided according to the terms laid down by the court. So, while a pre-nuptial contract is an agreement in most other countries, in India, it can only be an MoU since such documents are not recognised by the Indian courts. Mutual Funds Spend P2P Data Center Fuel Rates Diesel Rates Petrol Rates Bank Pan Number Bank holidays Penny Stocks MF Ratings & NAV Top Performing Schemes Top Star Rated Schemes Top Tax Saving Schemes Highest Risk Adjusted Return New Fund Offers Forthcoming Dividends NPS Top Performing NPS Scheme Most Consistent NPS schemes ETF Perfomance Latest Prices Listed Bonds Traded in Cash Market ULIPs ULIP Schemes Calculators Recurring Deposit Calculator Fixed Deposit Calculator LTCG Tax Calculator Income Tax Calculator Rent Receipt Generator SIP Calculator IFSC Bank Code NPS Calculator Invoice Generator EPF Calculator House Property Income HRA Calculator Sukanya Samriddhi Calculator Education Loan Calculator Car Loan Calculator Home Loan Calculator Personal Loan Calculator Risk Tolerance Calculator Financial Fitness Calculator Buy Online Health Insurance Car Insurance 2 Wheeler Insurance Interest Rates Recurring Deposit Rates Fixed Deposit Rates Bank Fixed Deposits Rates Post Office Schemes Rates MCLR Loan EMI Participate & Win Stocks & Shares ET Wealth ET Wealth Editions Buy Wealth Magazine ET Wealth Newsletter
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