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Business Preliminary Agreement

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BUSINESS PRELIMINARY AGREEMENT

This Business Preliminary Agreement (the "Agreement") is entered into as of Date: by and between Party A Name: and Party B Name: .

Recitals

WHEREAS, Party A and Party B each possess commercial capabilities, expertise and resources that may be complementary and wish to evaluate and negotiate a potential business arrangement concerning the matters described in the Scope of Work; and

WHEREAS, the parties desire to set forth certain preliminary understandings and agreed terms for further negotiation and, where applicable, to establish limited binding commitments as set forth herein.

WHEREAS, the parties intend that this Agreement will govern their interactions during the negotiation period and provide a framework for the preparation of any definitive agreements.

Scope of Work

The parties agree to negotiate in good faith regarding the following preliminary scope. The scope below describes the anticipated services, deliverables, and responsibilities to be further defined in a definitive agreement.

Payment Terms

Unless otherwise agreed in a definitive written instrument, the following preliminary payment terms will apply to any services performed under this Agreement that the parties agree are payable during the negotiation period.

Term and Termination

This Agreement shall commence on Start Date: and remain in effect until End Date: unless earlier terminated in accordance with this section.

Either party may terminate this Agreement for convenience upon providing Notice Period: days' prior written notice to the other party. A party may terminate immediately for material breach if the breaching party fails to cure the breach within 30 days after receipt of written notice.

Confidentiality

The parties acknowledge that during negotiations they will exchange Confidential Information. Except as expressly permitted in writing, each party shall: (a) hold Confidential Information of the other party in strict confidence; (b) use Confidential Information solely for purposes of evaluating and negotiating the proposed business relationship; and (c) limit disclosure to employees, agents or advisors who have a need to know and are bound to protect confidentiality at least as protective as this Agreement. Confidential Information shall not include information that is (i) publicly known other than by breach of this Agreement, (ii) already known to the receiving party prior to disclosure as evidenced by written records, or (iii) independently developed without use of Confidential Information.

The obligations of confidentiality shall survive termination of this Agreement for a period of three (3) years, except that trade secrets shall be protected for so long as they qualify as trade secrets under applicable law. Breach of this section will entitle the non-breaching party to injunctive relief in addition to any other available remedies.

Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of without regard to conflicts of law principles. The parties agree that exclusive jurisdiction and venue for any dispute arising hereunder shall lie in the state or federal courts located within that state.

Binding Effect; Entire Agreement

Except as expressly provided in this Agreement, the parties intend that this Agreement is preliminary and non-binding and is intended only to facilitate further negotiation toward a definitive agreement. Notwithstanding the foregoing, the parties expressly agree that the Payment Terms (to the extent payments are invoiced and accepted), Confidentiality, Governing Law, and obligations to pay for services actually performed and agreed in writing are binding obligations.

This Agreement constitutes the entire preliminary understanding between the parties with respect to the subject matter hereof and supersedes all prior proposals, negotiations, understandings and communications, whether oral or written. Any amendment to this Agreement must be in writing and signed by authorized representatives of both parties.

Miscellaneous

If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect. Neither party may assign or delegate its rights or obligations under this Agreement without the prior written consent of the other party, except to a successor in interest by merger or sale of substantially all assets.

Party A (Printed Name):

By:

Date:

Party B (Printed Name):

By:

Date:

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What a Business Preliminary Agreement Is and when it's used

A Business Preliminary Agreement is an initial written understanding between parties that records key commercial terms, scope, and the intent to negotiate a definitive contract. It typically covers the parties, basic obligations, consideration, confidentiality, exclusivity, timelines for due diligence, and any conditions precedent. The document can be binding for limited matters (confidentiality, exclusivity) while other provisions remain nonbinding until final agreements are executed. Organizations often use a preliminary agreement to align expectations before investing time or resources in drafting full contracts.

Why using a clear preliminary agreement reduces downstream risk

A concise Business Preliminary Agreement clarifies expectations, preserves negotiating positions, and documents short-term obligations such as confidentiality or exclusivity to prevent miscommunication.

Why using a clear preliminary agreement reduces downstream risk

Who typically prepares and signs a preliminary agreement

Organizations or individuals beginning commercial negotiations commonly prepare a Business Preliminary Agreement to manage early-stage commitments.

  • Startups and investors negotiating term sheets and nonbinding business terms.
  • Buyers and sellers beginning M&A or asset purchase discussions.
  • Vendors and enterprise procurement teams starting pilot projects or proof-of-concept work.

Signers should ensure authority and clarity on which clauses are intended to be binding versus nonbinding before signing.

Step-by-step: complete and execute the preliminary agreement

Follow these sequential steps to prepare, review, and finalize the Business Preliminary Agreement efficiently.

  • 01
    Draft: Populate parties, scope, key terms, and any short-term binding provisions.
  • 02
    Internal Review: Legal and finance teams confirm authority, tax, and compliance implications.
  • 03
    Counterparty Review: Send to the other party for redlines and negotiate material points.
  • 04
    Execute: Obtain authorized signatures and confirm effective date, retention, and distribution.

Essential clauses to include in a professional preliminary agreement

A robust Business Preliminary Agreement contains discrete provisions that define expectations, limit unintended obligations, and set the framework for subsequent definitive contracts.

Parties

Identify each legal entity, include entity type (LLC, corporation, individual), and list the authorized signer's name and title to prevent ambiguity about who is bound.

Scope

Describe the purpose, services, or assets covered by the preliminary agreement and attach any exhibits or schedules for detailed descriptions when necessary.

Consideration

Document any upfront payments, credits, or obligations exchanged; precise amounts or explicit descriptions reduce later disputes over whether adequate consideration exists.

Confidentiality

Specify protected information, permitted disclosures, duration, return or destruction requirements, and remedies for breach; this often survives termination.

Exclusivity / No-Shop

If included, define start/end dates, permitted activities, and remedies for breach; limit exclusivity scope to avoid unintended long-term restraints.

Governing Law

Identify the state law that governs interpretation and dispute resolution; choose a jurisdiction familiar to both parties to reduce forum uncertainty.

Typical workflow from draft to executed preliminary agreement

This high-level workflow shows common touchpoints and the flow of responsibilities for preparing and signing the agreement.

  • Prepare Draft: Author uploads template, fills core fields, and attaches exhibits.
  • Review Cycle: Internal stakeholders review then send to counterparty for edits.
  • Sign: Authorized signers execute, electronically or on paper, and date the document.
  • Record & Distribute: Final copies are distributed to parties and stored per retention rules.

Recommended online workflow settings for digital completion

Configure these fields when preparing the document for electronic signing to ensure correctness and auditability.

Field Configuration
Upload Document Use PDF or DOCX; preserve original pagination and exhibits.
Assign Parties Map signer roles to specific email addresses and contact names.
Authentication Choose email link, SMS code, or KBA based on risk profile.
Signing Order Set sequential or parallel signing depending on approvals.

Technical considerations for e-signing and document handling

Select platform settings and integrations that meet your security and workflow needs before sending for signature.

  • Integrations: Salesforce, Microsoft 365, NetSuite supported
  • File Formats: Accept PDF, DOCX, and fillable forms
  • Authentication: Email, SMS, or advanced methods available

Confirm the platform preserves an unalterable audit trail, protects data in transit and at rest, and supports your retention policies.

Common timelines and deadlines to include in the agreement

Specify concrete time frames to avoid ambiguity about performance, review periods, and termination rights.

Due Diligence Period:

30–60 days from effective date for inspections and document requests

Exclusivity Window:

Commonly 30–90 days; define start and end dates explicitly

Counterparty Response:

Set a business-day deadline (e.g., 10 business days) for counteroffers

Termination Notice:

Require written notice, often 10–30 days depending on clause

Escrow or Deposit Deadlines:

Specify date for deposit transfer or escrow funding

Key milestones from negotiation to final execution

Use a milestone sequence to track progress and trigger related obligations or expiry of short-term protections.

01

Drafting Complete

Initial draft prepared and circulated for internal review

02

Negotiation

Counterparty returns redlines and clarifying comments

03

Due Diligence

Both sides complete reviews and confirm material disclosures

04

Execution

Authorized signers execute and the agreement becomes effective

Common drafting and execution mistakes to avoid

  • Failing to state which clauses are binding versus nonbinding, causing unintended legal obligations during negotiations.
  • Using vague consideration language such as 'mutual cooperation' rather than specific payments or services, which can undermine enforceability.
  • Omitting signatory authority and titles, increasing the risk that a counterparty claims the signer lacked corporate power.
  • Neglecting to document confidentiality scope and exclusions, leading to disputes about proprietary information during due diligence.

Security and compliance essentials for signed preliminary agreements

Encryption: TLS 1.2/1.3 in transit; AES-256 at rest
Audit Trail: Timestamp, IP, and action log retained
ESIGN / UETA: Meets ESIGN and UETA legal standards
HIPAA Support: BAA available for protected health information
SOC 2: SOC 2 Type II certification available
21 CFR: Supports 21 CFR Part 11 workflows where required

Potential legal and financial consequences of errors

Enforceability Risk: Ambiguous terms may render promises unenforceable
Breach Liability: Wrongful exclusivity can trigger damages
I-9 Penalties: Documentation errors may lead to fines
Tax Penalties: Incorrect reporting invokes IRC §6721 penalties
Confidentiality Breach: Leads to injunctive relief and damages
Notary Defects: Improper notarization can void acknowledgements

Cost and feature snapshot of common eSignature vendors for preliminary agreements

Compare starting price, trial availability, bulk send capability, audit trails, HIPAA support, and envelope limits across vendors.

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 Yes, limited Yes, limited
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
Envelope Cap No cap 100 envelopes/user/year Varies Varies Varies

Real-world examples of preliminary agreements in action

These brief examples show how organizations use preliminary agreements to accelerate negotiations while managing risk.

Real Estate: Martin Properties

A regional broker used a preliminary agreement to lock exclusivity during due diligence and streamline closing timelines.

  • 30-day exclusivity secured.
  • Tim Martin, Founder, described processing and executing documents online with compliance and security across devices, which helped the firm move offers to final contracts without repeated in-person signings.

Healthcare: Fertility Centers of Illinois

A clinic used a preliminary agreement to define pilot program terms and patient data handling before a full contract.

  • HIPAA safeguards included.
  • John Butler, Founder, said the chosen e-signature solution provided responsive support and an API that fit clinical workflows, allowing the team to collect compliant authorizations efficiently.

Frequently asked questions about completing and signing a preliminary agreement

Answers to common questions about enforceability, electronic signatures, notarization, and amendment procedures.


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