Heads of Terms

Heads of terms are short documents setting out the main agreed terms between the parties in a commercial transaction. Heads of terms can take many forms from non-binding simple letters of intent and memoranda of understanding to term sheets where the aim is to highlight the agreed terms and there is no urgency in completing the transaction.

There are many advantages of using Heads of Terms:

• Establish confidence between the parties by creating a moral obligation on both parties to abide by the terms of the agreement;
• Clarify any misunderstandings and highlight any major issues by clearing any major obstacles before time and money is spent;
• Introduce binding terms such as confidentiality and protection for the parties in failed transactions.