Heads Of Terms Definition
A head of terms is a document which sets out the main points agreed between two parties before they enter into a more detailed contract. The heads of terms may also be referred to as a letter of intent, term sheet or memorandum of understanding.
The purpose of the document is to record the key commercial terms agreed between the parties so that they can proceed with negotiating and drafting the full contract with confidence that they are on the same page in terms of the key points.
The heads of terms should be clear and concise, and should avoid using legal jargon wherever possible. They should also be realistic in their expectations – this document is not intended to bind either party, but rather to provide a framework for further negotiation.
Some of the key points which might be included in heads of terms are:
– The names and contact details of the parties;
– The subject matter of the agreement;
– Any deadlines or timeframes for completion;
– The key deliverables from each party;
– An outline of any financial arrangements;
– A description of any confidential information which will need to be exchanged; and
– Any other important points which have been agreed between the parties.
