Heads of terms will usually cover these basic features and major points:
- The Price
- The Identities of the Parties
- The Fundamental Purpose of the Contract
- The Terms of the Contract/transaction
- Confidentiality Agreements
- Any protection for the parties in the event of a failed transaction
- Any unusual provisions which are key to whether a party would proceed with the transaction or not
In addition, heads of terms can also highlight any major issues and clarify any irreconcilable differences or misunderstandings between the parties should they occur. It is far better to do this at the outset, rather than during the course of a transaction when many hundreds/ thousands of pounds of fees and expenditure may have already been incurred.
Heads of terms help to create a positive attitude and establish a confident relationship between the parties, as it gives both parties the chance to establish a moral obligation to abide by the contract and the terms outlined.
In addition to these benefits, these agreements may contain ‘lock out’ clauses which are legally binding. These lock out clauses stop the parties concerned from negotiating with any other party or person for a fixed amount of time. This is to stop either party from feeling pressured into going ahead with a transaction for fear that the other party is negotiating with someone else regarding the transaction.
Our commercial property team has extensive experience of drafting and reviewing heads of terms, letters of intent and memorandum of understanding. We can negotiate and draft heads of terms agreements regarding any kind of commercial contract or business transaction. The legal ramifications of heads of terms contracts can be difficult to understand, and as such you need the help of a dedicated and experienced law firm to ensure your best interests are protected.
For more information on heads of terms, contact a member of our specialist team on 0203 816 9303.
Alternatively please complete our online enquiry form and a member of the team will contact you.