Is a term sheet legally binding?

It can be. Binding status depends on explicit language. Confidentiality, exclusivity, and certain fee provisions are commonly made binding; absent clear language, courts may treat the document as nonbinding.

Can a term sheet be signed electronically?

Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted; ensure intent, consent, attribution, and retention requirements are met.

Do term sheets require notarization or witnesses?

Ordinarily no. Most commercial term sheets do not need notarization or witnesses; state or industry requirements can vary, so confirm if the term sheet will be used for documents requiring notarization.

What if names or amounts are incorrect?

Incorrect names or monetary terms can void parts of a deal or delay closing; correct errors promptly with an amendment signed by all parties or include a clean copy in the definitive agreement.

How long should I retain executed term sheets?

Retain for the active term plus several years. Keep tax and financial records for 3 years (IRC §6501(a)) and HIPAA records for 6 years (45 CFR §164.530(j)) where applicable.

When should counsel be involved?

Engage legal and tax counsel before finalizing binding items, before signing if unusual terms or large exposures exist, and whenever regulatory approvals could affect the transaction.

Business Term Sheet

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

BUSINESS TERM SHEET

Parties

Company A Name:

Company A Address

Company B Name:

Company B Address

Recitals

WHEREAS, Company A is engaged in the business of providing goods and/or services related to ; and

WHEREAS, Company B desires to retain Company A to perform certain services and the parties wish to set forth the principal terms on which such transaction will proceed; and

WHEREAS, this document is a term sheet intended to record the principal commercial terms and is subject to negotiation and execution of definitive agreements as provided below.

Transaction Overview

Proposed Transaction:

Parties' Roles: Company A will act as ; Company B will act as .

Scope of Work

Detailed Scope of Work

Payment Terms

Total Consideration Payment Schedule Late Payment Fee

Late fee: of the past-due amount per month, or the maximum permitted by applicable law, whichever is less.

Term and Termination

Term Commencement Date: .

Termination Date or Duration: , unless earlier terminated in accordance with this Term Sheet.

Termination Notice Period

Either party may terminate for material breach by the other party if such breach is not cured within the notice period set forth above. Termination for convenience requires written notice as specified above.

Confidentiality

The parties agree that all non-public information disclosed in connection with negotiations, performance, or delivery of services under this Term Sheet is Confidential Information. Each party shall (i) hold such information in strict confidence, (ii) use it only for the purposes of evaluating or performing the contemplated transaction, and (iii) not disclose it to any third party except to its employees, advisors, or affiliates on a need-to-know basis who are bound by substantially similar confidentiality obligations. The confidentiality obligations shall survive termination of this Term Sheet for a period of .

Binding Effect; Definitive Agreements

Except for the Confidentiality and governing law provisions and any expressly stated binding provisions, this Term Sheet is intended solely as a summary of the principal terms and is non-binding. The parties intend to negotiate in good faith and execute definitive agreements containing customary representations, warranties, covenants and conditions precedent before any binding transaction is consummated.

Governing Law

This Term Sheet shall be governed by and construed in accordance with the laws of the State of , without regard to its conflicts of law principles.

Entire Agreement

This Term Sheet constitutes the entire understanding between the parties with respect to the matters set forth herein and supersedes all prior discussions, proposals and agreements, whether written or oral, relating to such matters, except that executed definitive agreements will control to the extent they contain contrary provisions.

Miscellaneous Provisions

Each party represents and warrants that it has the authority to enter into this Term Sheet. No amendment or waiver shall be effective unless in writing and signed by both parties. If any provision is held invalid, the remaining provisions shall remain in full force and effect.

Additional Notes

Company A:

By:

Date:

Company B:

By:

Date:

What a Business Term Sheet Is and when it matters

A Business Term Sheet is a short, non‑binding or partially binding summary of the principal economic and legal terms for a proposed transaction between parties, such as an acquisition, investment, joint venture, or asset sale. It typically lists parties, transaction structure, valuation, key conditions, exclusivity periods, confidentiality obligations, and proposed timelines so that counsel and negotiators have a clear negotiation roadmap. While many term sheets are preliminary and intended to guide drafting of definitive agreements, certain provisions (exclusivity, confidentiality, break fees) can be binding if the document states so explicitly.

Why use a Business Term Sheet

A term sheet aligns expectations early, narrows key points for counsel, and reduces negotiation time by separating economic terms from detailed contract drafting.

Who typically prepares or reviews a Business Term Sheet

Use the term sheet as a negotiation tool; involve legal and tax advisors early if any binding language or tax consequences are possible.

Investors and VCs reviewing valuation, ownership, and liquidation preferences.
Founders and corporate officers confirming governance, equity allocation, and key economic terms.
Outside counsel and transaction attorneys translating term sheet points into definitive agreements.

Core elements to include in a professional Business Term Sheet

A clear, well‑organized term sheet anticipates later drafting by defining scope, parties, financial terms, and conditions precedent while distinguishing binding from nonbinding provisions. Include enough detail to avoid ambiguity but keep the document concise.

Parties

Identify each legal entity by full legal name and state of organization so counsel can confirm authority and tax treatment; include contact for notices.

Transaction Summary

Describe the transaction type (asset purchase, stock purchase, equity investment), purchase price or consideration, and any cash vs. deferred payment mechanics.

Valuation & Capital Structure

State pre‑ and post‑money valuation, share classes, option pool size, and conversion mechanics to avoid later disputes about dilution.

Conditions & Closing

List conditions precedent such as due diligence, required approvals, consents, third‑party waivers, and regulatory filings needed before closing.

Exclusivity & Timing

Specify any no‑shop or exclusivity period, the duration of diligence, and target signing/closing dates to align expectations.

Confidentiality & Binding Clauses

State which clauses are intended to be binding (often confidentiality, exclusivity, break fees) and which are nonbinding to avoid unintended contractual obligations.

Step-by-step: completing a Business Term Sheet

Use this sequential checklist to create a clear, enforceable term sheet and prepare for the next drafting stages.

01

Draft core terms: Summarize parties, price, and structure in plain language for review.
02

Flag binding items: Mark confidentiality/exclusivity as binding if intended and state consequences.
03

Circulate for review: Share with counsel and key stakeholders for legal and tax input.
04

Sign and date: Obtain signatures from authorized representatives and track execution dates.

Configuring an online workflow for the term sheet

Set up fields, signer order, and audit capture before sending to ensure a compliant electronic signing process.

Field	Configuration
Template	Create reusable template with locked core terms and editable negotiation fields.
Conditional Fields	Use conditional visibility for optional consideration and escrow terms.
Signer Order	Define sequential or parallel signing to match negotiation workflow.
Audit Trail	Enable timestamps, IP capture, and signer authentication for evidentiary support.

Where to send the completed term sheet and what happens next

Route the executed term sheet to the appropriate parties and repositories to begin diligence and drafting of definitive agreements.

Primary Recipient: Investor or acquirer legal team receives the executed copy for file and next steps.
Counterparty Records: Maintain a copy in the target's legal folder and corporate minute book as appropriate.
External Advisors: Share with accounting and tax advisors to assess immediate tax consequences.
Document Repository: Store the final PDF and audit certificate in secure cloud storage for retention.

Technical considerations for eSigning and storage

Prefer platforms that preserve tamper‑evident copies and integrate with your document management system to streamline follow‑on workflows.

Authentication: Email, SMS, or stronger methods supported.
Integrations: CRM and document storage connectors available.
File formats: Supports PDF, DOCX, and exportable audit reports.

Common timing and deadline items in a Business Term Sheet

Include explicit dates and durations to prevent ambiguity about milestones, diligence, and exclusivity periods.

Effective Date:

Date the term sheet becomes operative; often triggers exclusivity and diligence windows.

Diligence Period:

Typical window is 30–60 days for due diligence unless otherwise specified.

Exclusivity/No‑Shop:

Specify the duration the seller will not solicit other offers.

Signing Target:

Target date for definitive agreement signature to align resources.

Closing Target:

Projected closing date and any soft or hard deadlines tied to financing.

Key milestones from term sheet to closing

A typical milestone sequence clarifies responsibilities and keeps the deal on schedule.

01

Term Sheet Execution

Parties agree to principal terms and sign the term sheet.

02

Due Diligence

Buyer completes financial, legal, and operational review.

03

Draft Definitive Agreements

Counsel draft purchase or investment documents per term sheet.

04

Close Transaction

Conditions met, funds transferred, and final documents executed.

Common mistakes to avoid when preparing a term sheet

Leaving binding language ambiguous so parties later disagree whether confidentiality or exclusivity was intended to bind.
Failing to identify signatory authority which results in post‑execution ratification or voided commitments.
Omitting precise consideration mechanics, creating disputes over earnouts, holdbacks, or stock allocation.
Not specifying which terms survive signing, leading to unintended long‑term obligations or release of claims.

Potential legal and commercial risks from an incorrect term sheet

Unintended Contract: Binding obligations may arise if language is clear.

Monetary Damages: Breach claims may lead to compensatory awards.

Regulatory Exposure: Certain transactions require filings or approvals.

Tax Consequences: Incorrect structure can trigger adverse tax treatment.

Lost Exclusivity: Poorly defined no‑shop terms permit competing offers.

Reputational Risk: Public disputes can harm market relationships.

Typical vendor pricing and feature comparison for eSignature

Comparison focuses on starting price and core capabilities relevant to executing and managing Business Term Sheets; consult vendor pages for full plan details.

	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	Varies by vendor	Varies by vendor	Varies by vendor	Varies by vendor
Bulk Send	Yes (Business Premium)	Yes	Yes	Yes	Varies
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes (BAA required)	Yes	Yes	No	No

Real-world examples of term sheet use

These brief examples show how organizations use concise term sheets to streamline signature, diligence, and drafting workflows.

Martin Properties

Company needed remote execution for multiple lease acquisitions

used a concise term sheet to lock commercial terms during negotiation
The approach allowed counsel to draft definitive leases quickly and enabled property closings without in‑person execution, preserving timeline integrity.

Optica Ventures LLC

Venture investor required clear economics before diligence

a short term sheet captured valuation and board structure
This clarity reduced negotiation cycles and focused legal review on material reps, warranties, and closing conditions.

Frequently asked questions about Business Term Sheets

Answers to common questions about enforceability, signatures, and digital handling of term sheets in U.S. transactions.

Need help? Contact support

Is a term sheet legally binding?
It can be. Binding status depends on explicit language. Confidentiality, exclusivity, and certain fee provisions are commonly made binding; absent clear language, courts may treat the document as nonbinding.
Can a term sheet be signed electronically?
Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA where adopted; ensure intent, consent, attribution, and retention requirements are met.
Do term sheets require notarization or witnesses?
Ordinarily no. Most commercial term sheets do not need notarization or witnesses; state or industry requirements can vary, so confirm if the term sheet will be used for documents requiring notarization.
What if names or amounts are incorrect?
Incorrect names or monetary terms can void parts of a deal or delay closing; correct errors promptly with an amendment signed by all parties or include a clean copy in the definitive agreement.
How long should I retain executed term sheets?
Retain for the active term plus several years. Keep tax and financial records for 3 years (IRC §6501(a)) and HIPAA records for 6 years (45 CFR §164.530(j)) where applicable.
When should counsel be involved?
Engage legal and tax counsel before finalizing binding items, before signing if unusual terms or large exposures exist, and whenever regulatory approvals could affect the transaction.

be ready to get more

Join over 28 million airSlate SignNow users

Sign Now