Is a Business In Principle Agreement legally binding?

It can be if it contains the elements of contract formation. Parties commonly label portions 'non-binding' and include explicit reservation of rights. Use clear language to avoid unintended binding commitments; consult counsel when economic terms or deposits are present.

Can this agreement be signed electronically?

Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted. Confirm any industry-specific exceptions and ensure the chosen platform captures intent, consent, attribution, and retention.

Do I need a notary or witnesses?

Most Business In Principle Agreements do not legally require notarization, but certain jurisdictions or related documents (deeds, powers of attorney) do. Check state rules where the transaction touches real estate or statutory formalities.

What if parties disagree after signing?

Disputes commonly arise over interpretation or whether the document was binding. Preserve communications, rely on clear non-binding language where intended, and consider mediation clauses for dispute resolution.

How should electronic records be preserved?

Retain the signed document and audit trail that shows signer identity, timestamp, and consent. Ensure storage meets applicable regulations such as HIPAA or IRS where relevant to the transaction.

Who must sign to bind a corporation?

A corporate officer or authorized signatory should sign and include title. For material transactions, attach a corporate resolution or officer certificate showing authorization to bind the entity.

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Business In Principle Agreement

Business In Principle Agreement

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BUSINESS IN PRINCIPLE AGREEMENT

This Business In Principle Agreement (the "Agreement") is made as of by and between:

Client Name: ; Address:

Provider Name: ; Address:

RECITALS

WHEREAS, the parties desire to establish agreed principal terms for a business relationship under which the Provider may perform certain services or deliver certain products described herein; and

WHEREAS, the parties intend by this Agreement to record their mutual understanding of key commercial and legal terms as a basis for detailed definitive agreements and for commencement of preliminary performance consistent with the terms below.

SCOPE OF WORK

The Provider will perform the services and/or provide the deliverables described below. The parties acknowledge that this section sets out principal obligations and that detailed specifications and milestones may be appended by mutual written agreement.

Describe scope of work

PAYMENT TERMS

In consideration for the services and deliverables, the Client shall pay the Provider in the amounts and on the schedule set forth below. All amounts are in lawful currency unless otherwise stated.

Total payment amount Payment schedule and milestones Late payment fee / interest

All payments shall be made within the times specified above. Any disputed invoice must be notified in writing within ten (10) days of receipt and the undisputed portion shall remain payable. Provider may suspend performance for nonpayment after providing written notice and a ten (10) day opportunity to cure.

TERM AND TERMINATION

This Agreement shall commence on and shall continue until unless earlier terminated as provided herein.

Notice period for termination (days)

Either party may terminate this Agreement for material breach by the other party if such breach remains uncured thirty (30) days after written notice specifying the breach. Termination shall not relieve either party of obligations accrued prior to termination or of obligations which by their nature survive termination.

CONFIDENTIALITY

"Confidential Information" means non-public information disclosed by either party relating to business operations, financials, technical data, customer lists, pricing, or other proprietary information. Each party shall: (a) hold Confidential Information in strict confidence; (b) not disclose Confidential Information to any third party except to employees, contractors or advisors with need to know and subject to equivalent confidentiality obligations; and (c) use Confidential Information only for performance under this Agreement.

Confidentiality duration (years)

Confidentiality obligations shall survive termination for the period specified above, except for information that: (i) is or becomes generally available to the public other than by breach of this Agreement; (ii) is independently developed by the receiving party; or (iii) is required to be disclosed by law, provided the disclosing party is given prompt notice and reasonably cooperates in any protective measures.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction identified below, without regard to its conflict of law principles.

Governing law (state or jurisdiction)

ENTIRE AGREEMENT

This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous understandings, proposals, negotiations and communications, whether written or oral. No amendment or modification of this Agreement shall be binding unless executed in writing by authorized representatives of both parties.

MISCELLANEOUS

Each party represents and warrants that it has the authority to enter into this Agreement and perform its obligations. Neither party shall assign this Agreement without the prior written consent of the other, except to a successor by merger or sale of substantially all assets. If any provision is held unenforceable, the remaining provisions shall remain in full force and effect.

Additional terms (optional)

First Party (Client):

By:

Date:

Second Party (Provider):

By:

Date:

What a Business In Principle Agreement Is and When It’s Used

A Business In Principle Agreement documents preliminary terms parties have agreed to before negotiating or executing a final contract. It typically outlines the principal commercial points — scope, price range, exclusivity windows, timelines, and key conditions precedent — so stakeholders share a common understanding before drafting detailed legal language. The document can be standalone or incorporated into a term sheet or memorandum of understanding. It helps allocate negotiation risk, set expectations for due diligence, and preserve the parties’ intent while work on definitive agreements continues.

Why Use a Business In Principle Agreement

It clarifies core deal terms, reduces misunderstandings during negotiation, preserves negotiating positions, and creates a record of mutual intent that can speed drafting of definitive contracts. When properly drafted, it helps manage timelines and expectations without committing parties to final legal obligations prematurely.

Who Typically Prepares and Signs This Agreement

The form suits lawyers, deal teams, and commercial leaders who want a concise reference of agreed deal points prior to final documentation.

Corporate development teams and executives coordinating M&A, strategic investments, or joint ventures.
Lenders and borrowers outlining principal loan terms before a formal credit agreement.
Buyers and sellers in asset or business sales establishing price range and exclusivity.

Core Elements to Include in a Professional Agreement

A well-structured Business In Principle Agreement covers the essentials needed to move toward a final contract while avoiding premature binding commitments. Each element should be clear, narrowly scoped, and framed as provisional where appropriate.

Parties

Legal names and entity types for each party, including state of formation and any parent companies or subsidiaries involved in the transaction.

Scope

High-level description of the transaction or business arrangement, including assets, services, or equity being contemplated.

Economic Terms

Indicative price range, valuation metrics, deposit or good-faith amounts, and any proposed payment structure.

Conditions

Key conditions precedent such as due diligence milestones, financing, regulatory approvals, or third-party consents.

Exclusivity

If applicable, the duration and scope of any exclusivity or no-shop obligation and permitted carve-outs.

Next Steps

Timelines for definitive agreement drafting, responsibilities for each party, and milestones for completing negotiation or closing.

Stepwise Process to Complete a Business In Principle Agreement

Follow a concise sequence to capture agreement points, confirm authority, and prepare for definitive documentation.

01

Draft core points: Summarize scope, price, conditions, and timeline.
02

Circulate internally: Obtain approvals from legal, finance, and executives.
03

Share with counterparty: Confirm intent and negotiable items.
04

Sign and record: Execute provisional agreement and archive for reference.

Where to Send or File the Signed Agreement

Determine routing and storage before sending: identify who receives originals, internal records, and external counsel or escrow agents.

Corporate Records: Store signed copy with board minutes or deal files.
Counterparty: Deliver fully executed copy to all signing parties.
Legal Counsel: Provide counsel with a final executed version for incorporation into definitive documents.
Escrow/Agent: Send to escrow or closing agent if deposits or escrow conditions apply.

Digital Signing and Technical Requirements

Ensure the chosen platform supports ESIGN/UETA compliance, long-term storage, and exportable audit records for due diligence and dispute resolution.

Document Formats: PDF or DOCX recommended for consistent rendering.
Authentication: Email, SMS code, or stronger methods for high-risk deals.
Audit Trail: Capture timestamps, IP, and signer attribution.

How to Configure an Online Signing Workflow

Set up a simple signing flow that matches your negotiation and approval sequence.

Field	Configuration
Signer Order	Sequential or parallel routing as needed
Required Fields	Make signature, name, and date mandatory
Authentication Method	Email link or SMS code per signer
Audit Options	Enable full audit trail and download on completion

Common Timing, Deadlines, and Processing Expectations

Agreements and associated milestones typically follow predictable windows; define each date clearly to avoid disputes.

Effective Date:

When provisional obligations begin; enter MM/DD/YYYY

Negotiation Window:

Commonly 30–90 days for due diligence and drafting

Exclusivity Period:

Often 30–60 days; define start and end precisely

Deadline for Definitive Agreement:

Set a specific calendar date or a number of days after Effective Date

Document Retention Start:

Begins on Effective Date for retention counting

Common Mistakes to Avoid When Preparing This Agreement

Using vague economic terms (e.g., 'fair market value') without an agreed valuation method or formula.
Failing to confirm signer authority; corporate signatories should include title and proof of authorization.
Leaving ambiguities around whether terms are binding or non-binding, which can create unintended obligations.
Omitting a clear timeline for moving to a definitive agreement, causing negotiation drift and missed milestones.

Key Legal Risks and Potential Consequences

Reliance Claims: Damages for party reliance

Binding Language: Accidental contract formation

Authority Issues: Signatures lacking authority

Confidentiality Breach: Loss of trade secrets

Regulatory Risk: Noncompliance fines

Recordkeeping: Failure to retain required records

How Organizations Use a Business In Principle Agreement — Real Examples

These brief examples show how teams use a provisional agreement to streamline negotiation and move to definitive documents.

Optica Ventures LLC

Optica used a concise principles document to align stakeholders before drafting the purchase agreement, reducing rework during due diligence.

The interim agreement set price range and exclusivity.
"The interface is simple and easy-to-use for our team; more importantly, it is just as easy for our customers."

Martin Properties

Martin Properties recorded principal sale terms and site remediation responsibilities in a short form to enable board review and lender outreach.

The document clarified who pays for remediation work and timing.
"I can process and execute all of these documents online with 100% compliance and built-in security. Whether on mobile or working offline, I can get forms back to their necessary parties efficiently."

eSignature Provider Comparison for Executing Business In Principle Agreements

Typical evaluation criteria include starting price, availability of free trials, bulk send, audit trails, HIPAA support, and envelope caps. signNow is listed first for comparison.

	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 free trial	No	No	No	No
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No

Frequently Asked Questions About Business In Principle Agreements

Answers to common legal and practical questions when preparing or signing a Business In Principle Agreement.

Need help? Contact support

Is a Business In Principle Agreement legally binding?
It can be if it contains the elements of contract formation. Parties commonly label portions 'non-binding' and include explicit reservation of rights. Use clear language to avoid unintended binding commitments; consult counsel when economic terms or deposits are present.
Can this agreement be signed electronically?
Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted. Confirm any industry-specific exceptions and ensure the chosen platform captures intent, consent, attribution, and retention.
Do I need a notary or witnesses?
Most Business In Principle Agreements do not legally require notarization, but certain jurisdictions or related documents (deeds, powers of attorney) do. Check state rules where the transaction touches real estate or statutory formalities.
What if parties disagree after signing?
Disputes commonly arise over interpretation or whether the document was binding. Preserve communications, rely on clear non-binding language where intended, and consider mediation clauses for dispute resolution.
How should electronic records be preserved?
Retain the signed document and audit trail that shows signer identity, timestamp, and consent. Ensure storage meets applicable regulations such as HIPAA or IRS where relevant to the transaction.
Who must sign to bind a corporation?
A corporate officer or authorized signatory should sign and include title. For material transactions, attach a corporate resolution or officer certificate showing authorization to bind the entity.

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