Commercial Contracts – Heads of Terms

A Heads of Terms or Heads of Agreement document usually sets out the main terms that two or more parties intend to formally agree. It outlines the commercial deal in principle. Such a document is not legally binding on the parties, but it does show evidence that the parties are serious to reaching an agreement.

There is no standard document, however, it should be clearly headed as ‘Heads of Term’ or ‘Heads of Agreement’ and all parties should sign and date it. There should also be a disclaimer clause to the effect that the terms in the document are not exhaustive and they are not legally binding except as listed in the document.

Heads of Terms are most often used where a prospective tenant wishes to take on a new lease from a commercial landlord. Other situations include a purchase of shares or assets.

It is always advisable to seek expert advice before entering any agreement or contract.

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