Letters of Intent (LOIs) and Memorandums of Understanding (MoUs) are typically non-binding agreements, meaning they are not legally enforceable in court unless they contain specific clauses indicating a binding intent. While they may serve as a foundation for a formal contract, their enforceability depends on the language used and the parties' intent.

Letters of Intent (LOIs) and Memorandums of Understanding (MoUs) are preliminary documents used in negotiations, often before formal contracts. Their enforceability depends on intent, language, and context, varying across jurisdictions.

1. Letters of Intent (LOIs)
Nature & Purpose
Used to outline key terms of a potential agreement (e.g., mergers, joint ventures, real estate deals).

May include binding provisions (e.g., exclusivity, confidentiality) and non-binding clauses (e.g., future negotiations).

Enforceability
Generally non-binding if phrased as an "agreement to agree" (Walford v Miles, 1992 – UK).

Partially binding if certain clauses (e.g., confidentiality, exclusivity) are clearly intended to be enforceable.

Binding if essential terms are settled and parties demonstrate intent to be legally bound (Balfour v Balfour, 1919 – distinguishes social vs. commercial intent).

Indian Position
Indian courts examine language and intent (e *g., Trimex International v Vedanta Aluminium, 2010 – LOI can be binding if terms are clear).

If an LOI includes all essential elements of a contract (offer, acceptance, consideration), it may be enforceable under the Indian Contract Act, 1872 (Section 10).

2. Memorandums of Understanding (MoUs)
Nature & Purpose
More formal than LOIs, often used in government agreements, international treaties, and joint ventures.

Can be binding or non-binding, depending on wording.

Enforceability
Non-binding if vague (e.g., "parties shall negotiate in good faith").

Binding if it contains definite obligations (Kollipara Sriramulu v T. Aswatha Narayana, 1968 – SC held that an MoU can be a contract if it meets legal requirements).

Government MoUs (e.g., between states or PSUs) are often not enforceable unless statutory backing exists.

Indian Position
Courts look for intention to create legal relations (M. Rajendran v Tamil Nadu Housing Board, 2014 – MoU was binding as it had specific terms).

Public sector MoUs (e.g., between two PSUs) may be enforceable if they meet contractual requirements (ONGC v Streamline Shipping, 2002).