Heads Of Terms - Key Issues To Consider

Your commercial negotiations have reached a certain stage. You now wish to record the main points and the basis on which you agree to proceed with the transaction in the form of Heads of Terms (also known as heads of agreement, memoranda of understanding, term sheets or letters of intent). The Heads will only deal with commercial, and not legal issues, and therefore you don't need to involve the lawyers ... right?

Unfortunately not. Regrettably, it is relatively common for parties to enter into Heads of Terms without professional advice. Care should be taken when adopting this approach – a document recording the principal terms of a commercial transaction may create a legally binding contract despite your understanding that you had only signed a non-binding document. This article sets out some key issues to consider before signing off on any Heads of Terms.