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THE LEGAL VALIDITY OF MOU IN INDIA

In my previous blogs, I have explained about MOU [better known as MEMORANDUM OF UNDERSTANDING] and how does it work. Also, that a Memorandum of Understanding or “MOU” is used at a variety of places starting from business, divorce, partnership firms, companies, familial relationships, government organisations, between Foreign and Indian Nationals etc. It is the general notion that a “MOU” is non biding and has got no legal validity in India. In my present blog, I shall discuss about another unanswered question which have had contrasting views and try to discuss each aspect and then conclude and comment upon the validity of “MOU” in India. The basic stressing areas shall include the following1.     Introduction to the validity of “MOU”2.     Legal position of “MOU” in Indian Law3.     Enforceability of “MOU”a.      In General b.     International “MOU”c.      “MOU” between two countries 4.     Landmark Judgments 5.     Personal Opinion6.     Conclusion INTRODUCTION TO THE VALIDITY OF “MOU”A “MOU” is generally said to be a ‘non-binding agreement’ which does not have any legal enforceability and thus acts merely as a ‘letter of intent’ between two parties who mutually agree or disagree to do or not to something and on the basis of which another legally binding instrument is executed keeping all the previous understandings outlined in such “MOU” and giving it effect. As such we can decipher two things 1.     A “MOU” is merely a statement of understanding between two or more parties which when made has no enforceability in the eyes of law as such an agreement has no intention to create a legal bond between such persons. As a result of which, if in case there is a breach of such “MOU” there is no relief. 2.     It is a well-established rule of law that – “All contracts are agreements but, all agreements are not contracts”. This is so because for a contract to be valid it needs to fulfil all the essential ingredients mentioned u/s 10 of The Indian Contract Act, 1872. One of which is – “an intention to create legal relationship between the parties to such contract”. However, now the question arises that what if A “MOU” is drafted in such a manner that is fulfills all the ingredients of section 10??? Can such a “MOU” be a valid contract and be legally enforceable in a court of law???Can such a “MOU” compel the other person to oblige to the same and the breach of such “MOU” will be treated similar to that of a breach of contract??? It is also true that ‘Nomenclature’ of a contract or an agreement is not an index to determine the validity or invalidity of the same. Stating an agreement to be a “MOU” does not explicitly denote that such contract is non-binding.LEGAL POSITION OF “MOU” IN INDIAN LAWAs mentioned above, now that we can understand the fact that it is not necessary for a “MOU” to be non-binding. The question of whether such a “MOU” is legally binding or not depends upon the intent of the parties to create a legal relationship to that extent. Therefore, we can say that the legal position of “MOU” in Indian Law depends upon the intent by which such a document is made and thus such an intention of creating a legal relationship by way of such a “MOU” plays a pivotal role in determining the legal position of the same. Also, it must be noted that the construction of such “MOU” holds primary importance in setting the legality and the construction of words play a pivotal role in the same. If the parties intend to create a legal binding effect to a “MOU” then,a.      The construction of the words shall be of such nature ü Use of the word ‘shall’ instead of ‘may’ü ‘would be’ instead of ‘can be’ü ‘should be’ instead of ‘might be’ So, on and so forth. The use of such words tries to create a legal relationship by making the other person liable to do a certain act. The words shall, would, should, instead of may, can, might are of a superior nature and bind the acts which follow after such words. b.     “legal binding clause”ü A “MOU” would be legally binding if the parties thereto agree to insert any such clause, the literal meaning upon reading of which would mean that such a “MOU” intends to create a legal relationship between the parties to the contract and that the breach of such provisions would mean the same as a breach of a contract under the Indian Contract Act, 1872. c.      In consistency with section 10 of the Indian Contract Act, 1872ü If a “MOU” fulfills all the conditions laid down u/s 10 of the Indian Contract Act, 1872 then, such a “MOU” should be treated as a contract as defined in section 2(h) of The Indian Contract Act, 1872. Hence, giving it a legal force. d.     Insertion of a “dispute resolution clause”ü If a “MOU” inserts a dispute resolution clause, then, it binds the parties to perform their obligations as mentioned or specified in such “MOU”. Non performance of which will lead to breach/dispute for which the “MOU” in itself shall contain a clause which shall provide the method in which such dispute shall be resolved in good faith and in an amicable manner. Thus, from the above we can say that – The principle legislation governing “MOU” in India is dealt with the Indian Contract Act, 1872. Also, in order to make a “MOU” legally enforceable it must have a clear intention to bind the parties to a contract whereby both come under specific obligation to perform their part of the duties. ENFORCEABILITY OF “MOU”As has been discussed earlier in this blog, the enforceability of a “MOU” depends upon the principle governing legislation. I.e. The Indian Contract Act, 1872. In light of this, the enforceability of “MOU” can be divided into 3 categories. a.     In General b.     International “MOU”c.      “MOU” between two countries IN GENERALIn the general sense, the enforceability of a “MOU” can be divided into two categories. They are: 1.     When it fulfills the conditions of a Contract as per The Indian Contract Act, 1872.ü If the “MOU” satisfies the conditions laid down u/s 10 of The Indian Contract Act, 1872 then, the performance of such obligations laid down in the “MOU” can be enforced vide The Specific Relief Act, 1963. ü However, such a relief shall only be granted under The Specific Relief Act, 1963 when, the damage caused to the aggrieved party by way of non-performance of obligation cannot be ascertained and compensation for in lieu of such damages fails to become an appropriate remedy. Sen Mukherjee and Co vs. Chhaya Banarjee [AIR 1998 / CAL 252]2.     When it does not fulfill the conditions of a Contract as per The Indian Contract Act, 1872.ü In certain cases, the courts may find that the “MOU” lacks certain requirements to form a valid Contracts and hence the same cannot be enforced. ü However, even in the above circumstance a person has the right to approach to the court on the basis of: Ø Principles of promissory estoppel     &Ø EquityMotilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh   [AIR 1979, SC 621]ü Even beyond that, a “MOU” can be held as enforceable merely on the grounds of equity and on the basis of the general principles of equity irrespective of whatever deficiency it holds is still held to be a contract. Subimalchandra Chatterji vs. Radhanath Ray [AIR 1934, CAL 235]INTERNATIONAL “MOU”ü Any International “MOU” is executed in the form of a treaty or a covenant which is then registered under the ‘United Nations Treaty Collection’.ü These International “MOU” should be registered and by doing so one avoids political diplomacy and secrecy.ü The enforceability of a National or International “MOU” does not differ. In both the cases, the enforceability is dependent upon the intention so conveyed through the construction of such “MOU” ü The title of such International “MOU” nowhere mentions whether it is a legally binding document or whether it is non-binding document. It is prudent to mention here that, The International Court of Justice in the year 1994, July 1st [Quatar vs. Bahrain] has expressed their views upon the legality of “MOU” and had also provided various standards to be maintained for the legality of such “MOU”INTERNATIONAL “MOU” BETWEEN COUNTRIESü As it has already been mentioned and is clear now that no “MOU” is legally binding without the clear intention of it making it as binding. ü Nevertheless, there are “MOU” between countries for a variety of reasons and some of them can be as follows. The “MOU” entered between two countries can have the object and purpose of: - 1.     Exchanging resources between themselves 2.     Exchanging technology between themselves 3.     Student exchange programs4.     Exchange of technical support 5.     Military Support 6.     Understanding of peace 7.     Understanding of trade 8.     Understanding of allies          ETCü The above list though not exhaustive, mentions some of the reasons why two countries enter into a “MOU” and act accordingly. ü Also, every “MOU” must not be formally designed and executed, but those which have been formally designed and executed must be registered and include the exchange of some monetary value with the same. LANDMARK JUDGMENTSGiven below are a list of landmark judgments which have been held to be useful in deciding the legality or non-legality of “MOU” CASE LAWS WHERE “MOU” HAS BEEN DECLARED AS A LEGALLY BINDING DOCUMENT 1.     BrikramKishore Parida v. Penudhar Jena2.     Structural Waterproofing & Ors. v. Mr. Amit Gupta3.     Jai Beverages Pvt. Ltd. v. State of Jammu and Kashmir and Ors4.     Millenia Realtors Private Limited v. SJR Infrastructure Private Limited 5.     Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh6.     M/s. Nanak Builders and Investors Pvt. Ltd. v Vinod Kumar Alag7.     Kollipara Sriramulu vs. T. Aswathanarayana &OrsCASE LAWS WHERE “MOU” HAS NOT BEEN DECLARED AS A LEGALLY BINDING DOCUMENT 1.     Monnet Ispat and Energy Ltd. v. Union of India and Ors2.     Jyoti Brothers v. Shree Durga Mining Co PERSONAL OPINIONAfter going through all the above details, facts, and decisions one can conclusively conclude that a “MOU” is generally a non-binding agreement made for the purpose of making another agreement which shall rely upon the principles of such “MOU” and then carter them into a legally binding agreement. Going by the same logic it is stated by the courts that any agreement which is made for the purpose of making another agreement cannot be given the legal status of an agreement. So, to say, an agreement for an agreement is not enforceable. However, now the question arises that – if a “MOU” which is said to be an agreement on the basis of which another agreement is made which then becomes a contract and the breach of such contract shall be legally bending but not a “MOU”. Then, would it be right to say that 1.     A pre-mortgage agreement 2.     A pre-sale agreement 3.     A pre-lease agreement           ETCOr, any such agreement which has the same purpose that which of a “MOU” merely having different names as mentioned above shall also come under the same purview and shall not be legally binding? To which I can deduce the following: - 1.     Mere heading of any agreement shall not be used as an index to come to the decision of its legality or illegality. The contents of the same shall hold value and the agreement in full shall be taken into consideration with respect to equity and principles of promissory estoppel. 2.     The construction and use of words in such agreement shall also be taken into consideration which will further help the reader to analyse the same and conclude whether such agreement was made with an intention to comply with or was it made just for namesake and was merely a promise. 3.     Insertion of various clauses like “legal binding” “indemnification” “damage” “breach” which shall show the clear intention to make such agreement legally binding would play a pivotal role. 4.     A “MOU” is said to be an agreement which needs to fulfil the valid requisites of a contract u/s 10 of The Indian Contract Act, 1872 as it is the guiding principle legislation. Hence it can be said that if any agreement [irrespective of its nomenclature] fulfils the conditions as laid down u/s 10 of such act shall be deemed to be legal and enforceable. CONCLUSION From the above we can finally come to the conclusion that: - 1.     Any agreement to be a contract shall fulfil the provisions of section 10 of The Indian Contract Act, 1872. 2.     An agreement may or may not be legally binding depending upon the intention between the parties who enter into a contract. 3.     In its generic definition a “MOU” is defined to be a non-binding document, however, if there lies a clear intention of compliance then such “MOU” shall be binding. 4.     It is a well-established rule of law that if a “MOU” fulfils all the conditions laid down u/s 10 of The Indian Contract Act, 1872 then, such a “MOU” shall be legally binding. 5.     Apart from everything a “MOU” can be enforceable in spite of deficiencies on the grounds of equity and promissory estoppel as held in the case of Subimalchandra Chatterji vs. Radhanath Ray [AIR 1934, CAL 235]. 

Posted By

Shreyash Mohta

3 months ago

CHILD CUSTODY LAWS IN INDIA

CHILD CUSTODY LAWS IN INDIA. INTRODUCTION After a marriage breaks down or ends up in separation of spouses, the person who gets affected the most is the children who is born out of the marriage. Thus, while keeping in mind the right of parent’s to the custody of a child, the Indian Law, holds the child’s welfare as the most crucial factor of consideration while deciding upon who gets the custody of a minor child.WHICH FACTORS CONSTITUTE WELFARE OF A CHILDThere are three factors which constitutes the welfare of the child:-·      Ethical upbringing of the child·      Safe-keeping of the child·      Good education to be imparted·      Economic well-being of the guardianWHO HAS A RIGHT ON MINOR CHILD AFTER DIVORCE?Both the parents have an equal right to the custody of a child. However, who gets the custody of a child is still a question which the court has the power to decide upon. Moreover, when it comes to personal laws the statues are conflicting as compared to secular enactment in the form of The Guardian and Ward Act, 1890 which holds the welfare of the child as the paramount importance and thereby the court of competent jurisdiction endeavor to strikes a balance between the two. And as because the custody of the children is given to one parent that doesn’t implies that the other parent cannot be in contact or see the child. The courts in India makes sure that the child gets attention and affection of both the parents. The court gives the other parent visitation rights of which the conditions are determined by the court.KINDS OF CHILD CUSTODY ARRANGEMENT IN INDIAA court of competent jurisdiction in India primarily orders the custody of children in the following three forms:1.    PHYSICAL CUSTODYPhysical custody when awarded to a parent, implies that the minor will be under the guardianship of that parent with periodical interaction and visitation with the other parent. The target behind such a custody award is to give a better life to the child in a safe and fulfilling environment and also makes sure that the child is not deprived of the affection of the other parent during his or her formative years.2.    JOINT CUSTODYJoint Custody of a child does not implies that both the parents have to live together because of the child despite the fact that Indian courts believe that it is the best for the welfare of a minor. Joint custody actually means that both the parents will take care of the child turn by turn keeping the child in their custody. The rotation of the child among the parents may vary from certain days or a week or even for a month. These benefits the child as on one hand the child gets the attention of both the parents and on the other hand parents get to be a part of their child’s life.3.    LEGAL CUSTODYLegal custody of a child does not necessarily entails having the child with the parents or vice-versa. It basically means that the parents are granted the legal custody and they can take every decision for the child likewise education, medical treatment, etc. In most of the cases, legal custody is granted to both the parents together but in certain cases where the divorce is messy and parents do not agree with each other, then in such cases the court grants legal custody to any of the one parent.HOW TO KNOW THE TYPE OF CUSTODY GRANTED?Till the time the order of the court does not specially mentions the conditions discussed above, the parent who is awarded the custody of the child gets the physical custody as well as legal custody. If there is any other kind of custody awarded, it will be mentioned in the order of the court and will be made clear to both the parties.WHO CAN CLAIM CUSTODY OF A CHILD?The custody of a child can be claimed either by mother or the father. In any of the case where the two of the parents are not in the picture due to operation of some other laws or deceased then in such situation, the maternal or the paternal grandparents or any other relatives can claim custody of the child strictly out of compassion towards the child. In many cases, the court appoints the third person as the guardian of the child.WHO HAS THE PRIORITY CLAIM TO THE CUSTODY OF A CHILD?The Hon’ble Supreme Court and other courts in India have repeatedly mentioned that for the custody of a minor, the only consideration is the welfare of the minor, irrespective of the claims of the parties to the custody of children.Under Hindu law and as well as Secular law, the custody of the child under the age of five is usually awarded to the mother. In most of the cases fathers gets the custody of the older boys and mother of the older girls. Moreover, child’s interest is the main criteria and the choice of the child above the age of nine is considered by the court. Wherein a mother if found to ill-treat and neglect the child is not given custody.WHO GETS THE CUSTODY OF A MINOR IN CASE THE MOTHER HAS A WEAKER FINANCIAL CONDITION AS COMPARED TO THE FATHER BUT THE FATHER HAS REMARRIED AND HAS KIDS WITH SECOND MARRIAGE?In such cases, the mother cannot be discarded as the guardian only because she earns less than the father. Well, in such case the father of the child has to provide for the child’s maintenance. Moreover, the principle of law says that a step- mother has primarily obligation of affection and attention towards her own children and the father would remain out for work all day, and thus, the mother is proved to be a better guardian for the minor child.LEGISLATIONS GOVERNING CHILD CUSTODY UNDER DIFFERENT LAWS IN INDIA:India being a secular nation has different religions to follow and thus every religion has their personal law set for child custody which determines the process by which a parent seeks the custody of their child.1)    CUSTODY UNDER HINDU LAW:The laws under Hindu Law namely, Section 26 of Hindu Marriage Act 1955, Section 38 of Special Marriage Act 1954 and Hindu Minority and Guardianship Act 1956 mentions the rules and regulations set for seeking child custody. Let us discuss about them in details:a)    Section 26 of Hindu Marriage Act 1955It deals with the maintenance, caring and education of child and only when both the parents follow Hindu religion, the custody of child gets validated. Under this act, the court can pass orders, judgements, amendments, etc. at any point of time in respect to the maintenance of child and dispose of the pending decree within the 60 days from the date of service of notice.b)   Section 38 of Special Marriage Act 1954This act validates the custody of the child in case both the parents belong to different religions or have undertaken a court marriage. Under this act, the court can pass orders, judgements, amendments, etc. at any point of time in respect to the maintenance of child and dispose of the pending decree within the 60 days from the date of service of notice.c)    Hindu Minority and Guardianship Act 1956This act allows only biological parents to seek the custody of their minor child provided that he/she is a Hindu.2)    CUSTODY UNDER MUSLIM LAWUnder Muslim law, only the mother has the right to seek his/her child custody as per Right of Hizanat until she is not found guilty of any misconduct.·      The custody of a child under Muslim law is with the mother until the child has attained the age of 7 years for a boy and until she has attained the age of puberty or majority for a girl.·      The custody of the child remains with the father until the boy has attained the age of 7 years and the girl has attained the age of majority or puberty as because the father is considered to be the natural guardian. 3)    CUSTODY UNDER CHRISTIAN LAWThe Christian religion needs to follow the laws and reforms set under Section 41 of Divorce Act, 1869 for the child’s custody. Also, in addition to this law, Section 42 and 43 of the same holds the right to decide upon the child’s custody after the judgement with respect to separation has been passed. The child is given to a person who server better and is proved to be a batter guardian for the child and the claim can even be denied if the court finds that both the parents are incapable of giving a proper atmosphere to the child.4)    CUSTODY UNDER PARSI LAWThe custody of a child under Parsi law is dealt with the provisions of the Guardians and Wards Act, 1890. Its main aim is the welfare of the child and can put anything to stake to make sure that the welfare of the child is confirmed. CONCLUSIONIn India, the custody of a child depends upon the personal laws and read with The Guardians and Wards Act, 1890. The foremost thing is to allot the custody of a child to seek welfare and so if required the other personal law rules and rituals can be set aside. Preferences are given to the parents and the child but it is the court who takes the final decision regarding the custody of the child.     

Posted By

Neha Roy

3 months ago

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