Parties
Full legal names and addresses for each party, including entity type (e.g., LLC, corporation) and contact information for notices, so service and corporate authority are clear.
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Agreement in Principle
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What an Agreement in Principle Is and When It’s Used
Why Use an Agreement in Principle Early in a Transaction
An Agreement in Principle clarifies expectations, reduces negotiation friction, and documents essential terms so parties can proceed with due diligence or approvals. It helps manage risk and schedules while keeping the final contract flexible.
Who Typically Prepares or Signs an Agreement in Principle
The document is used by a variety of stakeholders to align on deal fundamentals before preparing a binding agreement.
- Lenders and mortgage underwriters seeking early debt terms for underwriting and credit approval.
- Buyers or investors capturing purchase price, contingencies, and timelines during negotiations.
- Corporate procurement or legal teams documenting principal commercial terms before contract drafting.
Use this document when you need documented commitment to terms for planning or regulatory review but are not yet ready to execute a final legally binding contract.
Complete an Agreement in Principle: Step-by-Step
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01Gather parties: List full legal names and contact details for each party.
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02Define terms: State key commercial points—price, scope, deadlines, and contingencies.
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03Add conditions: Specify conditions precedent and required approvals or due diligence.
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04Sign & date: Have authorized representatives sign and record the effective date.
How an Agreement in Principle Fits into the Transaction Flow
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Draft: Prepare short document capturing essential, negotiable terms.
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Review: Parties review and confirm terms; internal approvals obtained.
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Sign: Authorized representatives sign to record mutual intent.
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Proceed: Move to formal contract drafting and conditions-based work.
Digital Workflow Settings for Completing the Agreement
| Field | Configuration |
|---|---|
| Signature Field | Required; capture signer name and timestamp |
| Date Field | Auto-fill MM/DD/YYYY on signer completion |
| Conditional Fields | Show finance details only if financing chosen |
| Authentication | Use email link or SMS code; increase to KBA for high-risk deals |
Technical Considerations for eSigning and eSubmission
Ensure the signing platform supports required authentication, audit trails, and file formats for downstream use.
- File formats: PDF, DOCX accepted
- Authentication: Email, SMS code, KBA options
- Audit Trail: Captures IP, timestamp, and signer actions
Choose settings that demonstrate intent, record consent, and preserve a tamper-evident history suitable for legal or compliance review.
Core Elements You Should Include in a Professional Agreement in Principle
Scope
A brief but specific description of the goods, services, or transaction fundamentals to reduce later ambiguity during drafting and performance.
Price and Payment
Exact monetary amounts, payment schedule, deposit requirements, and any financing assumptions; avoid open-ended pricing language.
Key Dates
Effective date, expected closing or delivery dates, milestones, and any deadlines for condition satisfaction to guide project planning.
Conditions
List conditions precedent such as regulatory approvals, financing, inspections, or audits that must be satisfied before final contract execution.
Confidentiality
If needed, include a short confidentiality provision limiting disclosure of terms and negotiation materials until a final agreement is executed.
Supporting Items to Attach or Include with an Agreement in Principle
Term Sheet
A one-page term summary or schedule that lists price, payment terms, deliverables, and milestones to make drafting the final agreement faster and more accurate.
Budget or Financials
Basic financial statements, pro forma budgets, or lender commitment letters that verify assumptions underlying price or financing contingencies.
Project Schedule
A high-level timeline or Gantt-style schedule showing key milestones, dependencies, and handoff points cited in the Agreement in Principle.
Authority Documents
Board resolutions, power of attorney, or corporate documents where necessary to confirm signatory authority and reduce later disputes.
Common Mistakes to Avoid When Preparing an Agreement in Principle
- Overstating binding intent by using definitive language that converts a preliminary agreement into an unintended contract.
- Omitting conditions precedent or deadlines, which creates confusion about when obligations must be satisfied.
- Using vague monetary terms or undefined payment triggers that impede lender or accounting approvals.
- Failing to document signatory authority or attaching supporting corporate approvals, leading to enforceability disputes.
Risks and Legal Consequences of an Incorrect or Misleading Agreement in Principle
Misrepresentation:
May trigger reliance claims or promissory estoppel.
Premature binding:
Could unintentionally create enforceable obligations.
Regulatory risk:
Consumer or securities rules may impose disclosure obligations.
Tax exposure:
Incorrect figures can affect reporting and withholding.
Delay costs:
Ambiguity can extend negotiations and increase expenses.
Reputational risk:
Broken expectations can harm future deals.
Comparison: eSignature Pricing and Feature Summary Relevant to Agreements in Principle
| signNow | DocuSign | Adobe Sign | PandaDoc | HelloSign | |
|---|---|---|---|---|---|
| Starting Price | $8/user/mo | $15/user/mo | $14/user/mo | $19/user/mo | $15/user/mo |
| Free Trial | 7-day trial | Varies | Varies | Varies | Varies |
| Bulk Send | Yes (plan dependent) | Yes | Yes | Yes | Yes |
| Audit Trail | Yes | Yes | Yes | Yes | Yes |
| Envelope Cap | No cap | 100 envelopes/user/year | Varies | Varies | Varies |
Frequently Asked Questions About Agreements in Principle
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Is an Agreement in Principle legally binding?
Not necessarily. Courts look at language and intent. If parties use binding phrasing and omit contingency conditions, a preliminary document may be treated as enforceable under contract law, so clearly label any nonbinding intent.
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Can it be signed electronically?
Yes. Electronic signatures meet the ESIGN Act (15 U.S.C. ch. 96) and UETA in most U.S. jurisdictions if intent, consent, attribution, and record retention are satisfied.
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Do I need notarization or witnesses?
Most Agreements in Principle do not require notarization. If a future recorded instrument or power of attorney is anticipated, check state requirements for notarization or witness counts before execution.
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What authentication is appropriate for high-value deals?
Use stronger signer authentication (KBA, SMS OTP, or platform two-factor) and retain a robust audit trail; higher assurance reduces later disputes about signer identity.
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How do I convert it into a binding contract?
Draft a definitive agreement that incorporates agreed terms, satisfies conditions precedent, and includes execution by authorized signatories; have counsel review material legal provisions.
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Which eSignature plan suits high-volume use?
Signatures for large volumes often use site-license or enterprise plans; signNow offers a Site License pricing model and Business/Enterprise tiers with bulk and API capabilities for scale and compliance.
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