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Difference between the Agreement and the Memorandum of Understanding (MoU)


When entering into a legal transaction, there are two options available to the parties, namely an agreement or memorandum of understanding. While a I agree refers to the agreement between the legally competent parties, it is generally negotiated. Conversely, in Memorandum of Understanding (MoU) It is a type of agreement between legally competent parties, which is not binding.

A MoU contains the description of the understanding between the two parties, including the requirements and responsibilities of both. These two are legal documents, which are often confused with each other, but the fact is that they are different. Take a look at the article to understand the difference between agreement and memorandum of understanding.

Comparative graph

Basis for Comparison Agreement Memorandum of Understanding
SenseAn agreement is a document in which two parties agreed to work together for a common goal.A Memorandum of Understanding or MoU is a legal document that describes the terms of an agreement between the two or more parties that form a bilateral or multilateral agreement.
ElementsOffer, acceptance.Offer, acceptance, intention and consideration.
EnforceabilityAn agreement may be enforceable in the court of law.A Memorandum of Understanding cannot be enforceable in the court of law.
Binding natureIt is always binding on the parties to the agreement.It is binding on the parties, if the memorandum is signed in exchange for a monetary consideration.
Collateral rightsSDo not
To formOral or writtenWritten

Definition of Agreement

The agreement is referred to as a state when two parties agreed to the same thing, in the same way, i.e. "consensus ad idem" to work together to achieve a common goal. It can be oral or written or implicit and it can be legal or illegal.

The agreement consists of a proposal that must be accepted by the party to whom the proposal is made, and when it is accepted, it becomes a promise from the parties to each other, to which it has been agreed. The parties to the agreement have the right to go to court in case of breach of the agreement.

Below are the types of agreement:

  • Conditional agreement
  • Express agreement
  • Implicit agreement
  • Agreement executed
  • Execution Agreement
  • Void agreement
  • Voidable Agreement

Definition of Memorandum of Understanding (MoU)

A Memorandum of Understanding (MoU) is known as a written legal document that fully describes the principles of an agreement between the two or more parties that form a bilateral or multilateral agreement duly signed by the parties.

The Memorandum of Understanding between the parties must clearly mention the terms of the agreement, that is, the objective must be definitive with which they agree. There must be a clear understanding between the parties, regarding the intention to be followed soon. However, a MoU lacks legal enforcement, if either party has done something against the MoU and because of this the other party has suffered some loss, then the injured party has the right to recover the loss because the parties are linked for a legal impediment .

Key differences between the agreement and the memorandum of understanding (MoU)

  1. The agreement is a document in which two or more parties agreed to work together for a common goal, while the Memorandum of Understanding (MoU) is a written document that describes the terms of an agreement.
  2. The elements of an agreement are the Offer, the Acceptance, while the elements of a MoU are the Offer, the Acceptance, the Intent and the Consideration.
  3. The significant difference between an Agreement and a MoU is that an Agreement can be made enforceable in the court of law, but a MoU cannot be made enforceable, but the parties are nevertheless bound by a estoppel.
  4. An agreement is binding in nature, while a memorandum of understanding is binding on the parties if the memorandum is signed in exchange for monetary consideration.
  5. The parties to the agreement have warranty rights, but the parties to the MoU have no warranty rights.
  6. An agreement can be implicit, but a MoU can never be implicit.

Similarities

  • Both consist of an offer, acceptance.
  • There must be two or more parts.
  • Consensus ad idem, that is, the parties must agree the same thing in the same way.
  • The common goal of the parties.

Conclusion

The significant points of the differences between an Agreement and a Memorandum of Understanding (MoU) have been discussed above, after which it would be easier to choose between these two terms.

Most business people, government agencies, legal bodies, and individuals often use these two entities in their everyday lives to deal with another party, to achieve a common goal. The parties must clearly understand that, if they want their decisions to be binding on each other, they can request an agreement that gives the parties their substantial rights, and they can also enforce it in the court of law. Whereas, if the parties do not want any legal link to them, they can go to MoU.