- Commercial Contract Drafting, Review & Negotiation
- Master Service & Service Agreements
- Vendor, Supplier & Procurement Agreements
- Consultancy & Independent Contractor Agreements
- Agency, Distribution & Franchise Agreements
- Non-Disclosure & Confidentiality Agreements
- MoUs, Term Sheets & Letters of Intent
- Corporate Structuring & Governance
- Shareholders' Agreements
- Share Purchase Agreements
- Share Subscription & Investment Agreements
- Joint Venture & Strategic Collaboration Agreements
- Partnership & LLP Agreements
- Founders' Agreements
MoUs, Term Sheets & Letters of Intent
A memorandum of understanding (MoU), a term sheet and a letter of intent each record the main terms of a deal before the full agreement is written. Whether one is legally binding in India depends on what it says and what the parties intended, not on its title. A document called an MoU can be a binding contract.
Most are drafted so that the commercial terms do not bind until the definitive agreement is signed, while a few clauses, such as confidentiality and exclusivity, bind at once. Under the Indian Contract Act, 1872, an agreement whose terms are uncertain, or which only promises to agree later, cannot be enforced.
When you need it
At the start of a deal
Recording the price, structure and timetable early shows whether the parties actually agree before money is spent on full documents.
When raising investment
An investor’s term sheet sets the valuation and rights that the shareholders’ agreement will follow.
When exclusivity is asked for
A buyer or investor often wants the other side to stop talking to anyone else while it carries out due diligence.
When collaborating with an institution
Universities, government bodies and large companies commonly begin a collaboration with an MoU.
When you have signed one and things have changed
Whether a party can walk away, or is already bound, depends on how the document was written.
How the process works
Four stages. Timings are typical, not promised.
- 1
Establish the deal and its stage
A call or meetingRecord what has been agreed, what is still open and what has to happen before a final agreement, such as due diligence, approvals or financing.
Documents
- Emails or notes recording what has been discussed
- The other side’s draft, if any
- 2
Decide what should bind
Part of the first draftDecide which parts are intended to be binding now and which are a statement of intent. The document should say so in express words for each part.
- 3
Draft or review
Commonly a few working daysSet out the commercial terms clearly, then the binding clauses: confidentiality, exclusivity and its duration, costs, governing law and when the document lapses if no final agreement is signed.
- 4
Sign and move to the definitive agreement
At signingStamp the document where it contains binding obligations, sign it, and use it as the outline for the final agreement so that settled points are not reopened.
Common questions
It can be. Courts look at the substance: whether the terms are certain, whether there is consideration and whether the parties intended to be bound. An MoU that meets these tests is a contract, whatever it is called.
By saying so expressly, identifying the clauses that are binding as exceptions, and stating that no party is obliged to complete the transaction until definitive agreements are signed. Conduct matters too: acting as if the deal is done weakens that position.
Confidentiality, exclusivity for a fixed period, each party bearing its own costs, governing law and dispute resolution. Some term sheets also make a break fee binding.
Mostly usage. A term sheet is typical in investment and lending, a letter of intent in acquisitions, leasing and procurement, and an MoU in collaborations. The legal effect of each depends on its wording.
Generally not. A promise only to negotiate, or to agree terms in future, is too uncertain to enforce. A promise not to negotiate with anyone else for a fixed period is certain, and can be enforced.
If it creates binding obligations, it is an agreement for stamp duty purposes and should be stamped under the law of the state where it is signed. A purely non-binding statement of intent is in a different position, but stamping removes the doubt.
The definitive agreement normally says that it replaces everything agreed earlier, so it prevails. Until it is signed, a party who has relied on a binding clause of the term sheet can enforce that clause.
Related
To discuss an MoU or term sheet, write to info@ireniclegal.com or call +91 96547 47331. Written by Adv. Kanika Marwaha Bindal; last updated 7 October 2026.