Employee Establishment & Administration,
Korgaonkar K A
Hr, Ir, Law, Disc. Matters
Retired From Air India
Service As Dgm-hr/legal
+5 Others

Kindly explain the difference between a conntract for supply of goods or services and a MOU. Urgengtly please.
1st December 2012 From India, Calcutta
Dear, MOU - Minutes of meeting - only the discussion done with the parties. Contract - Terms finalised for services between both parties along with signature with wittness. Regards, Sanjay Mulay
1st December 2012 From India, Pune
Dear friends,
I hope here mou will mean memorandum of understanding, which refers to an agreement , which again may be bi-partite or tri-partite. A memorandum or agreement is not a contract but some terms and conditions of a contact are derived from an agreement. A contract is as per the Indian Contracts Act whereas an agreement is dealt as per the ID Act in case of labour related matters. Trade Unions are party in case of agreements whereas in case of contracts only a contractor and a principal employer are involved etc.etc.
1st December 2012 From India, Calcutta
Dear M.A.S.Qadri ji,
You are correct only in meaning of MOU i.e. Memorandum of Understanding.
MOU is only a document describing a bilateral or multilateral agreement. It is only a will of the parties. It is only a document of an understanding between the parties before finalizing contract or agreement.
There is a difference between agreement and contract. An agreement enforceable by law is a contract. All contracts are agreements but all agreements are not contracts. Agreement is a contract if it is made by free consent of parties competent to contract for lawful consideration and with lawful object. And the same is not expressly declared to be void.
Other members can comments on this.
Thanks and regards.
Keshav Korgaonkar
1st December 2012 From India, Mumbai
Dear friend,
MoU is nothing but " Memorandum of Understanding : which means a written statement summarizing the terms of a contract or a similar legal transaction with mutual comprehension of parties involved in the agreement made for the benefit of the parties or for promotion of their developmental activities or functions with reciprocal help.
A contract is a formal or legally binding agreement, e.g. one for the sale of property, or one setting out terms of employment.
Both the documents are subject to legal scruitiny.
Suri Babu Komakula
3rd December 2012 From Canada, Calgary
Dear SRK & others, Legally speaking, in terms of Contract Act 1872, there is no difference between a MOU and contract where MOU is also an agreement reached between two parties capable of entering into an agreement on subject which is legally valid. In ordinary parlance, MOU refers to a broad understanding reached between the parties whereas contract will be much more specific. In terms of HR, there could be a broad understanding with trade unions by way of MOU to provide for a resolution of issue, for example on wage revision understanding could be reached for giving a benefit of 25% but the details like pay scale, increments etc could be worked out mutually later. Thus it can be said that MOU is a prelude to a composite agreement giving broad terms of mutual understanding and has to be read along with detailed agreement on the specfics to be reached later. MOU, thus brings a immediate truce to the problems with a hope for more clear understanding in future.

Hope the above clarifies: KK
3rd December 2012 From India, Bhopal
Mou may beecome a contract subject to contract act 1872. A memorandum of understanding is a document where two parties agree to do something on a future date or is an event, for example two parties sign an MOU ffor consultancy where one is the consultant and the other is the receiver. Now if the offer is complete against each other it is a contract. There must be some consideration between the parties. MOU if accepted, and is not in violation of any law is a contract.
Advocate Ravichandran
Supreme Court Of India
3rd December 2012 From India, Thiruvananthapuram
Dear KK ji,
With due respect to you Sir, I disagree to your first sentence which says- “Legally speaking, in terms of Contract Act 1872, there is no difference between a MOU and contract”. However, I agree with Advocate Ravichandran who said that MOU may become a contract subject to contract act 1872.
To add, I will say MOU is just a mutual consent or understanding. It is just a proposal. It is not a concluded contract.
According to my understanding, MOU possesses legal value as evidence in the eyes of law. It has no legal enforceability as such. But it is a very useful tool. You may convert MOU as a part of contract.
Legality of MOU arises when any party fails to perform the understanding reached. Even in HR prospective, if you agree to dis-agree the understandings reached with Union, what will be the legal effect?
Thanks with regards.
Keshav Korgaonkar
3rd December 2012 From India, Mumbai
A memorandum of understanding (MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement. It is a more formal alternative to a gentlemen's agreement.
So far as HR prospective a MoU has no legal enforceability if betrays by any of the party. Any agreement registered under the provisions of ID Act before the registering authority only will be valid otherwise it is nullity.
So for if it relates to supply of goods it has legal value and often courts accepts it as a binding documents between the parties
3rd December 2012 From India, Delhi
In my company when I challenged the transfer policy of the management ,arguing that why ladies in same cadre appointed on the same terms and conditions to the same post of 'traffic assistants' are not transferred ,the management replied that they have an understanding with the recognised employees union so as not to transfer them.Would the court of law accept this or shall the court reject it as discrimination based on gender ? Someone please clarify.
3rd December 2012 From India, New Delhi
MOU And Contracts


A memorandum of understanding (MoU) is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement.

1. A document that expresses mutual accord on an issue between two or more parties.

2. Memoranda of understanding are generally recognized as binding, even if no legal claim could be based on the rights and obligations laid down in them.

3.Include each parties requirements and responsibilities. This is more expeditious than other forms of documentation.

4. An MOU is far more formal then a handshake and is given weight in a court of law should one party fail to meet the obligations of the memorandum.

5. A memorandum of understanding is synonymous with a letter of intent (LOI), which is a non-binding written agreement that implies a binding contract is to follow.

6. To be legally operative, a memorandum of understanding must

(1) identify the contracting parties,

(2) spell out the subject matter of the agreement and its objectives,

(3) summarize the essential terms of the agreement, and

(4) must be signed by the contracting parties. Also called letter of intent.

7. The MOU is often the first stage in the formation of a formal contract.

MOUs can vary and be tailored to each organization’s or party’s needs. In brief, an MOU states or describes:
  • Who the partners are and their contact information
  • What it is they are going to be working on, the background of the project and why the MOU is being entered into
  • The scope of the document and who will use what the MOU provides
  • Specified activities, if already determined
  • Implementation of activities
  • Funding issues
  • Each party's roles and responsibilities
  • A time line, if desired
  • Duration of agreement
  • A signature and date of signature by all of the parties agreeing to the MOU


A contract is an agreement entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between or among them. The elements of a contract are offer and acceptance by competent persons having legal capacity who exchange consideration to create mutuality of obligation, and, in some circumstances, do so in writing.

1. An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract, although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.

2. Since the law of contracts is at the heart of most business dealings, it is one of the three or four most significant areas of legal concern and can involve variations on circumstances and complexities.

3. The existence of a contract requires finding the following factual elements:

a) an offer;

b) an acceptance of that offer which results in a meeting of the minds;

c) a promise to perform;

d) a valuable consideration (which can be a promise or payment in some form);

e) a time or event when performance must be made (meet commitments);

f) terms and conditions for performance, including fulfilling promises;

g) performance.

4. A unilateral contract is one in which there is a promise to pay or give other consideration in return for actual performance. (I will pay you $500 to fix my car by Thursday; the performance is fixing the car by that date). A bilateral contract is one in which a promise is exchanged for a promise. (I promise to fix your car by Thursday and you promise to pay $500 on Thursday).

5. At law, the remedy for breach of contract can be "damages" or compensation of money.

6. Contracts can be either written or oral, but oral contracts are more difficult to prove and in most jurisdictions the time to sue on the contract is shorter (such as two years for oral compared to four years for written). Proof of some or all of these elements may be done in writing, though contracts may be made entirely orally or by conduct.

7. In some cases a contract can consist of several documents, such as a series of letters, orders, offers and counteroffers.

8. There are a variety of types of contracts: "conditional" on an event occurring; "joint and several," in which several parties make a joint promise to perform, but each is responsible; "implied," in which the courts will determine there is a contract based on the circumstances. Parties can contract to supply all another's requirements, buy all the products made, or enter into an option to renew a contract.The variations are almost limitless.

9. Contracts for illegal purposes are not enforceable at law.
15th December 2012 From India, Mumbai
Dear Saibhakta, Since the management states that they have only an understanding with their recognised unions for not transfering the women employees, it means they do not have a proper agreement to back this policy. Although our Constitution prohibits discrimination on the basis sex, certain protective discrminations are perrmissible. But in this specfic case since all other terms of employment are same, discrimination on the basis of sex for transferability of the employees is not a valid policy.
16th December 2012 From India, Bhopal
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