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Memorandum of Understanding between Lender and Borrower to give loan.

Format of MoU between Lender and Borrower to grant Loan.

Memorandum of Understanding is an agreement made when two or more parties outlining the rights and obligations of the parties to the agreement are into initial discussions. It is just a means for two parties to reach a decision. MOU does not constitute a legally enforceable obligation. It is commonly used for a non-binding contract. If an MoU has been drawn for consideration, like for exchange of money, etc., the document would become binding on the parties, else it is a non-binding contract. Clauses such as jurisdiction clause, applicable law, indemnification have binding effects to the agreement.

Sample Format of Memorandum of Understanding between two parties is given below.



This Memorandum of Under Standing (MOU) is made at _______ on this _____ day of
__________ 20__ between M/s. _________ Limited, a Company incorporated under
the Companies Act, 1956 having its Registered Office at ________________________ (Hereinafter referred to as "the Lender" which term or expression shall unless excluded by or repugnant to the subject or context hereof shall mean and include its heirs, successors and assigns) of the ONE PART

AND Mr.______________ s/o ________________ r/o ________________________( Hereinafter referred to as "the Borrower", which term or expression shall unless excluded by or repugnant to the subject or context hereof shall mean and include his/her heirs, successors and assigns) of the SECOND PART.


a. The Borrower has agreed to pay to the Lender the sums due under the Loan Agreement dated _______.

b. The Borrower has paid a sum of Rs. _______ Lakh (Rupees ____________) in this behalf from time to time.

c. The principal amount of Rs__________ Lakh is due for payment as on _______. Further an amount of Rs ________ Lakh is payable by the Borrower towards interest to the Lender.



a. The Borrower has agreed to pay the amount due under this Loan Agreement by a one-time payment of the entire principal due before _________.

b. The Lender in consideration of the principal amount as per (a) above has agreed to waive the outstanding interest/penal interest due on the above loan.

IN WITNESS WHEREOF the Parties have put their respective hands on the day, month,
year and place first above written.

LENDER ___________________

Name __________ Signature _________ Address________



BORROWER  _________________

Name __________ Signature _________ Address________



Memorandum of Understanding (MOU)

A memorandum of understanding or MoU is a formal agreement between two or more parties. Companies and organizations can use MOUs to establish official partnerships. MOUs are not legally binding but they carry a degree of seriousness and mutual respect, stronger than a gentlemen's agreement. Often, MOUs are the first steps towards a legal contract. MOUs are popular in multinational international relations because, unlike treaties, they take a short time to ratify and can be kept confidential. MOUs may also be used to modify existing legal treaties.

Benefits of MoU

Common Intention of Parties
With any business dealing, it is paramount that both parties understand each other's goals and objectives.


Good for business relations
It is highly beneficial with clear terms and effective communication and dealings.


Reduces Risk of Uncertainty
Business negotiations can be rocky and uncertain at times. They can be particularly hazy at the beginning of relations between the parties. There is nothing worse than disagreeing with the business partner over contract terms. Hence, MOU's provide a great safeguard to reduce the risk of uncertainty in expectations and objectives.

Records Prior Agreements
Often during negotiations, two or more parties agree on certain terms which would then appear in the future contract. If a party retracts or forgets these terms, MOU comes handy. Although the document is not legally binding, it is useful as it records what has been agreed upon during negotiations. Therefore, this provides a clear understanding of the parties as their common objectives.


The Ease of Ending Engagements
An MOU can facilitate positive relations between parties as terms are set out. An MOU is a great starting point that establishes what both parties want to achieve out of the agreement.


Provides a Framework for Future dealings
An MOU can put our minds at ease. Having the proposed terms already set out in a prior document provides a framework for future dealings. The MOU can also be referred back to as a reminder of the parties' objectives and intentions if any confusion arises.

A master service agreement promotes a structure to consider and work out terms and requirements. So, the same conditions need not be continuously bargained for deals that are identical or associated with one another.


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