Are Heads of Terms legally binding?

Parts can be binding if the document expressly says so (for example, confidentiality or exclusivity clauses). Absent express binding language, courts examine intent, specificity, and reliance; ESIGN (15 U.S.C. §7001) and state UETA rules support electronic execution where conditions are met.

Can I sign electronically?

Yes. Electronic signatures that show intent, consent, attribution, and durable retention are enforceable under the ESIGN Act and UETA. For consumer-facing transactions, follow 15 U.S.C. §7001(c) disclosure and consent requirements.

Who may sign on behalf of a company?

Only authorized officers or individuals with delegated signatory authority should sign. Confirm authority via corporate resolution or a representation in the document to avoid later ratification issues.

Do I need a notary or witnesses?

Generally no for Heads of Terms. If the deal includes real property transfers or documents that later must be recorded, those specific documents will follow state notarization and witness rules.

How do I amend a Heads of Terms?

Document proposed changes in writing and obtain signatures of all parties for amendment. Specify whether amendments affect binding clauses and update execution dates accordingly.

How do I revoke or withdraw a Heads of Terms?

If non‑binding, a party can typically withdraw negotiations, but withdrawing from binding clauses may trigger remedies. Review any notice, break fee, or damages provisions before revocation.

Electronic Signature
Templates
Legal
Heads of Term Agreement

Heads of Term Agreement

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

HEADS OF TERM AGREEMENT

This Heads of Term Agreement (the Agreement) is entered into on between Proponent Name: with registered address at (hereinafter "Proponent") and Recipient Name: with registered address at (hereinafter "Recipient").

RECITALS

WHEREAS, the Proponent and the Recipient have conducted preliminary discussions and wish to record the principal commercial terms and conditions upon which they will negotiate a definitive agreement in respect of the proposed transaction described below;

WHEREAS, the parties intend that certain provisions of this document shall be legally binding as set forth herein, and that other provisions are non-binding expressions of intent to facilitate further negotiation and documentation;

WHEREAS, the parties wish to proceed promptly to due diligence and negotiation of definitive documentation in accordance with the timetable and conditions set out in this Agreement.

NOW, THEREFORE

In consideration of the mutual covenants contained in this Agreement, the parties agree as follows:

1. DEFINITIONS

In this Agreement, unless the context otherwise requires:

"Business Day" means a day other than a Saturday, Sunday or public holiday in the jurisdiction specified under Governing Law.

"Confidential Information" means all information disclosed by one party to the other, whether orally or in writing, marked or unmarked, that is confidential in nature including commercial, financial, technical, personnel and other information relating to the disclosing party's business.

2. NATURE OF THIS AGREEMENT

Except for the provisions expressly stated to be binding in clause 3.4 (Binding Provisions), this Agreement is non-binding and is intended solely as a statement of the current intentions of the parties in respect of the proposed transaction. Neither party shall be under any legal obligation to proceed with the proposed transaction unless and until a definitive written agreement has been executed by both parties.

3. PROPOSED TRANSACTION

3.1 Transaction: The parties intend to negotiate and document the terms pursuant to which the Proponent will (the Transaction).

3.2 Purchase Price: The indicative purchase price for the Transaction is payable in accordance with the definitive agreement. The parties acknowledge that this price is indicative and subject to adjustment by agreement following due diligence and negotiation.

3.3 Deposit / Escrow: An initial deposit of is proposed to be paid by the Purchaser into an escrow or stakeholder account to be agreed. The terms of release of such deposit shall be set out in the definitive agreement.

3.4 Binding Provisions: The parties agree that the following provisions shall be legally binding: Clause 4 (Exclusivity), Clause 5 (Confidentiality), Clause 8 (Costs), Clause 10 (Governing Law), and this clause 3.4. All other provisions of this Agreement are non-binding.

4. EXCLUSIVITY

4.1 For the period commencing on the date of this Agreement and ending on (the Exclusivity Period), the Recipient shall not solicit, initiate or continue discussions with any third party in relation to any transaction which would be competitive with the Transaction.

4.2 Breach of the exclusivity obligations by either party shall entitle the other party to seek injunctive relief and any other remedies available at law or in equity.

5. CONFIDENTIALITY

5.1 Each party shall keep confidential and not disclose Confidential Information except (a) to its professional advisers and financing sources on a need-to-know basis and who are bound to confidentiality no less protective than this clause, or (b) as required by law or regulation.

5.2 The obligations in this clause shall continue for a period of years from the date of disclosure or, where applicable, indefinitely in respect of trade secrets.

6. CONDITIONS PRECEDENT

Completion of the Transaction shall be conditional upon the satisfactory completion of due diligence by the Recipient and the fulfillment or waiver of the following conditions precedent:

7. TIMETABLE AND DUE DILIGENCE

7.1 The parties agree to use reasonable endeavours to complete due diligence within days of the date of this Agreement.

7.2 Access: The Proponent will provide the Recipient and its advisers with reasonable access to information, personnel and premises for the purpose of completing due diligence, subject to execution of any required confidentiality undertakings.

8. COSTS

Unless otherwise agreed in writing, each party shall bear its own legal, accounting and other professional costs and expenses incurred in connection with the negotiation and preparation of the definitive agreement and the Transaction.

9. TAX, EMPLOYEES AND LIABILITIES

The allocation of any taxes, employee liabilities, warranties and indemnities shall be addressed in the definitive agreement. The parties acknowledge that any statements in this Agreement as to liabilities are indicative and subject to completion of due diligence.

10. NOTICES

Any notice required or permitted to be given under this Agreement shall be in writing and delivered by hand, sent by registered mail, or by certified courier to the addresses set out below (or such other address as either party notifies in writing):

Proponent Notice Address Recipient Notice Address

11. AMENDMENTS, WAIVER AND COUNTERPARTS

No amendment or variation of this Agreement shall be effective unless recorded in writing and signed by or on behalf of each party. No waiver by a party of any breach of any provision of this Agreement shall be construed as a waiver of any continuing or succeeding breach.

This Agreement may be executed in counterparts and any party may execute this Agreement by signing any counterpart.

12. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of and the parties submit to the exclusive jurisdiction of the courts of that jurisdiction in respect of any dispute arising out of or in connection with this Agreement.

13. ENTIRE AGREEMENT

This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior discussions, representations, warranties and agreements, whether oral or written, in relation to that subject matter, except as expressly provided for herein.

14. SEVERABILITY

If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

15. MISCELLANEOUS

15.1 No Partnership: Nothing in this Agreement shall create any partnership, joint venture or agency relationship between the parties.

15.2 Assignment: Neither party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other party, such consent not to be unreasonably withheld.

ADDITIONAL PROVISIONS

Further Commercial Provisions / Notes

Proponent (Party A) - Print Name:

By:

Date:

Recipient (Party B) - Print Name:

By:

Date:

What a Heads of Term Agreement Is and When It’s Used

A Heads of Term Agreement is a concise, preliminary document that records the principal commercial and legal terms parties intend to include in a later definitive contract. Common in mergers, acquisitions, leases, joint ventures, and major supply arrangements, it summarizes price, scope, exclusivity, key conditions precedent, and timelines so parties align before investing in detailed drafting and due diligence.

Why Preparing a Clear Heads of Terms Helps the Deal

A well-drafted Heads of Term reduces negotiation risk by memorializing agreed fundamentals, sets realistic timetables for due diligence and execution, and clarifies which items remain open. While often non-binding, it focuses parties’ attention on key commercial points and can include binding provisions for confidentiality, exclusivity, and governing law under ESIGN (15 U.S.C. §7001) and applicable state law (UETA).

Who Typically Prepares and Signs Heads of Terms

Heads of Terms are used by deal teams to align on major points before committing resources to a full agreement.

Corporate development and legal teams — draft summaries that counsel can convert into definitive agreements.
Property owners and brokers — outline key lease or sale terms prior to contract drafting.
Investors and lenders — record investment size, milestones, and conditions during early negotiations.

Use the Heads of Terms to limit ambiguity and document interim commitments while reserving full contract drafting for the definitive agreement stage.

Core Elements to Include in Professional Heads of Terms

Include concise but precise language for commercial points and any specific binding clauses. Keep most sections high level but avoid vagueness where the parties expect enforceable interim obligations.

Parties

Full legal names and entity types for each party, including registered state and a primary contact for notices.

Transaction Scope

Clear description of the transaction type, assets or shares involved, and any excluded items or carve-outs.

Consideration

Agreed price or pricing formula and payment structure, including any deposit, escrow, or break fee provisions.

Conditions

List conditions precedent such as regulatory approvals, financing, third‑party consents, and satisfactory due diligence.

Exclusivity

Defined exclusivity period and allowed activities; specify remedies for breach of exclusivity if binding.

Confidentiality

Any binding NDA terms covering negotiations, plus permitted disclosures and survival period.

Essential Information and Compliance Items to Record

Legal Names: Exact registered entity name

Tax ID: EIN or SSN when required

Effective Date: MM/DD/YYYY format

Governing Law: State name and dispute forum

Confidentiality: Scope and survival period

Signature Details: Signer name, title, and date

Step-by-Step: Completing a Heads of Terms

Follow a short, ordered process to create a usable Heads of Terms that supports later drafting and execution of the definitive agreement.

01

1. Gather parties: Confirm legal names and authorized signatories
02

2. Draft main terms: Record price, scope, and key conditions
03

3. Decide binding sections: Mark confidentiality and exclusivity as binding if intended
04

4. Sign and circulate: Obtain signatures and retain execution copies

Configuring an Online Workflow for Heads of Terms

Set up a repeatable digital workflow to collect signatures, route for review, and retain executed copies securely.

Field	Configuration
Template Name	Heads of Terms Template
Signer Order	Sequential or parallel as required
Authentication	Email link, SMS code, or KBA
Reminder Schedule	Auto reminders at 3 and 7 days

Where to Send or File the Executed Heads of Terms

After execution, distribute copies to key stakeholders and store originals in a controlled repository for quick retrieval during drafting and due diligence.

Counsel: Send executed PDF to outside counsel for drafting
Internal Repository: Upload to secure document management system
Finance: Notify treasury or accounting for payment tracking
Escrow Agent: Deliver executed copy where escrow is used

Delivery Options and Platform Integrations

Use established delivery channels and integrate with core systems to minimize manual handoffs and errors.

Email: Standard signed PDF distribution
Remote Notary / RON: Available where permitted
API Integrations: Salesforce, NetSuite, Google Workspace

Select authentication and storage settings that meet your industry and regulatory requirements, and retain a tamper-evident audit trail for each execution.

Common Deadlines and Timing Expectations

Set explicit dates for exclusivity, due diligence, and signing targets to reduce contention and clarify penalties for missed milestones.

Exclusivity Deadline:

Date by which seller must stop negotiating with third parties

Due Diligence Cutoff:

Target date to complete all material diligence

Draft Definitive Agreement:

Target delivery date for the first draft

Signing Target:

Planned date for executing the definitive agreement

Conditions Satisfaction:

Date by which identified conditions must be satisfied

Key Deal Milestones and the Typical Sequence

Map milestones in numbered order so parties can monitor progress from Heads of Terms to definitive agreement execution.

01

1. Heads Agreed

Parties sign Heads of Terms and confirm binding clauses

02

2. Due Diligence

Buyer completes diligence and identifies outstanding issues

03

3. Drafting

Counsel prepares and circulates the definitive agreement

04

4. Closing

Conditions met, documents executed, and funds transferred

Frequent Drafting Mistakes to Avoid

Vague monetary terms — leaving price formulae or earnout metrics undefined can cause lengthy disputes and delay closing while parties renegotiate key economics.
Undeclared binding clauses — failing to specify which provisions are intended as binding (for example, confidentiality or exclusivity) leads to differing expectations and potential litigation.
Missing signatory authority — allowing a person without corporate authority to sign can render the Heads ineffective or require ratification by the principal entity.
Failure to coordinate deadlines — overlapping or unrealistic deadlines for diligence and signing commonly trigger extensions and erode trust between parties.

Consequences of an Incorrect or Incomplete Heads of Terms

Confidentiality Breach: Potential damages and injunctive relief

Loss of Exclusivity: Counterparty may solicit others

Negotiation Failure: Deal collapse and sunk costs

Authority Defect: Signatures may be voidable

Regulatory Delay: Approvals can defer closing

Contractual Ambiguity: Increased litigation risk

How a Heads of Terms Compares with Related Documents

Compare common preliminary documents to understand their usual binding effect and intended permanence before final contracts are prepared.

Document Type	Typically Binding	Typical Purpose
Heads of Terms		record key commercial points pre-drafting
Letter of Intent (LOI)	sometimes	outline intent, may include binding clauses
Memorandum of Understanding	sometimes	framework for collaboration, varies by drafting
Share Purchase Agreement		definitive and legally binding sale agreement

eSignature Provider Comparison for Executing Heads of Terms

Compare entry-level pricing and core features across vendors when choosing a platform to collect signatures and retain execution records.

	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	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No

Practical Examples of Using Heads of Terms in Transactions

Two condensed examples show how organizations use Heads of Terms to accelerate negotiations and control costs.

Optica Ventures — COO

Optica used a concise Heads of Terms to align on valuation and milestones before drafting the definitive sale agreement.

The summary narrowed due diligence focus to top 10 issues.
The team reported faster negotiations and fewer drafting rounds because the core economics were agreed up front; counsel converted the terms into a binding purchase agreement efficiently.

Martin Properties — Founder

A real estate operator recorded lease economics and a short exclusivity period in a Heads of Terms to begin tenant fit-out planning.

The document preserved confidentiality during broker negotiations.
Because the parties specified binding confidentiality and clear signing deadlines, the transaction moved to contract stage with minimal rework and no competing bidders.

Common Questions About Heads of Terms and Execution

Answers to frequent practical and legal questions about using Heads of Terms, signing authority, eSign validity, and amendment procedures.

Need help? Contact support

Are Heads of Terms legally binding?
Parts can be binding if the document expressly says so (for example, confidentiality or exclusivity clauses). Absent express binding language, courts examine intent, specificity, and reliance; ESIGN (15 U.S.C. §7001) and state UETA rules support electronic execution where conditions are met.
Can I sign electronically?
Yes. Electronic signatures that show intent, consent, attribution, and durable retention are enforceable under the ESIGN Act and UETA. For consumer-facing transactions, follow 15 U.S.C. §7001(c) disclosure and consent requirements.
Who may sign on behalf of a company?
Only authorized officers or individuals with delegated signatory authority should sign. Confirm authority via corporate resolution or a representation in the document to avoid later ratification issues.
Do I need a notary or witnesses?
Generally no for Heads of Terms. If the deal includes real property transfers or documents that later must be recorded, those specific documents will follow state notarization and witness rules.
How do I amend a Heads of Terms?
Document proposed changes in writing and obtain signatures of all parties for amendment. Specify whether amendments affect binding clauses and update execution dates accordingly.
How do I revoke or withdraw a Heads of Terms?
If non‑binding, a party can typically withdraw negotiations, but withdrawing from binding clauses may trigger remedies. Review any notice, break fee, or damages provisions before revocation.

be ready to get more

Join over 28 million airSlate SignNow users

Sign Now