Can this be signed electronically?

Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most jurisdictions, provided the transaction is not an exception (for example, wills or certain court filings). Ensure intent and consent are documented.

When is notarization required?

Notarization depends on state law and the document’s purpose. Some states require notarization for specific conveyances or powers. Verify state requirements before assuming notarization is optional.

Do witnesses need to sign?

Witness requirements vary by state and document type. For most business preliminary agreements witnesses are not required, but certain jurisdictions and transaction types may demand one or more witnesses.

How should confidential terms be protected?

If confidentiality is intended to be binding, include a clear confidentiality clause and mark it as binding; for PHI, add HIPAA-compliant language and execute a BAA where applicable.

What happens if a party lacks signing authority?

A signature by an unauthorized person can render the agreement voidable. Confirm authority with corporate resolutions or officer certifications prior to execution to avoid disputes.

How long should I retain executed copies?

Retain executed agreements for at least the active term plus three years; follow industry rules (e.g., IRS, HIPAA) for longer retention as required by statute or regulation.

Electronic Signature
Templates
Legal
Preliminary Legal Agreement

Preliminary Legal Agreement

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PRELIMINARY LEGAL AGREEMENT

This Preliminary Legal Agreement (the Agreement) is entered into as of by and between Party A: with principal address at , and Party B: with principal address at .

RECITALS

WHEREAS, Party A and Party B have entered into preliminary discussions regarding (the Transaction); and

WHEREAS, the Parties desire to set forth certain agreed principles and short-term obligations governing their negotiations and due diligence prior to executing a definitive agreement; and

WHEREAS, the Parties intend that certain provisions of this Agreement be binding while other provisions remain non-binding pending execution of a definitive agreement between the Parties on mutually acceptable terms.

NOW, THEREFORE, in consideration of the mutual covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:

1. DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings set forth in this Section. "Confidential Information" means all non-public information disclosed by a Party to the other Party, whether written, electronic or oral, that is designated as confidential or that a reasonable person would understand to be confidential given the nature of the information and the circumstances of disclosure.

2. PURPOSE AND SCOPE

The Parties agree to negotiate in good faith toward a definitive agreement regarding the Transaction described above. The scope of the Transaction shall include:

3. BINDING PROVISIONS

The Parties expressly agree that the provisions of this Section 3 are intended to be binding and enforceable immediately upon execution of this Agreement. All other provisions of this Agreement are preliminary and non-binding as provided in Section 4.

3.1 Confidentiality. Each Party shall keep Confidential Information in strict confidence and shall not disclose such information to any third party except as expressly permitted herein. The receiving Party shall use Confidential Information solely to evaluate and negotiate the Transaction. Confidentiality obligations shall survive termination of this Agreement for months.

3.2 Exclusivity. During the Exclusivity Period, neither Party shall solicit, initiate, or accept proposals from third parties regarding a transaction that would be competitive with the Transaction. Exclusivity shall commence on the Effective Date and shall continue until the earlier of the end of the Exclusivity Period or termination under Section 9.

Exclusivity Period (days): The Parties acknowledge that exclusivity is a binding obligation as set forth above: .

3.3 Expenses. Except as otherwise agreed in writing, each Party shall bear its own fees and expenses incurred in connection with the negotiation and preparation of the definitive agreement and any due diligence.

4. NON-BINDING PROVISIONS

Except for the binding provisions expressly identified in Section 3, this Agreement is non-binding and creates no obligation on either Party to consummate the Transaction or to enter into any definitive agreement. No Party shall be liable for reliance damages based solely on this Agreement, except for breaches of the binding provisions set forth in Section 3.

5. TIMELINE AND MILESTONES

The Parties intend to use commercially reasonable efforts to negotiate and execute a definitive agreement by: .

Milestones and Deliverables

6. DUE DILIGENCE

Each Party shall afford the other Party and its advisors reasonable access to documents, personnel, and premises necessary to conduct due diligence. Due diligence shall be conducted in a manner designed to minimize disruption to business operations.

Due Diligence Completion Date

7. REPRESENTATIONS

Each Party represents and warrants to the other that: (a) it has full power and authority to enter into this Agreement and to perform its obligations hereunder; (b) the execution and delivery of this Agreement has been duly authorized by all necessary corporate or other action; and (c) to the best of its knowledge, the execution of this Agreement will not violate any material agreement or applicable law.

8. NOTICES

All notices, requests, and other communications under this Agreement shall be in writing and delivered by hand, certified mail (return receipt requested), or overnight courier to the addresses set forth below or to such other address as either Party may designate in writing.

Notice Address for Party A Notice Address for Party B

9. AMENDMENTS; WAIVER; COUNTERPARTS

No amendment or waiver of any provision of this Agreement shall be effective unless in writing and signed by both Parties. A failure or delay by a Party to exercise any right shall not operate as a waiver. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

10. GOVERNING LAW; ENTIRE AGREEMENT; SEVERABILITY

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

This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof and supersedes all prior discussions and agreements. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect.

11. TERMINATION

This Agreement may be terminated by either Party upon written notice to the other Party if no definitive agreement has been signed by the target date set forth in Section 5 or by mutual written agreement of the Parties. Termination shall not relieve a Party of liability for breaches occurring prior to termination, including breaches of the binding provisions in Section 3.

12. MISCELLANEOUS

The Parties agree to negotiate in good faith and to use commercially reasonable efforts to resolve disputes arising under this Agreement. Nothing in this Agreement shall create any agency, joint venture, partnership or employment relationship between the Parties.

Party A - Printed Name:

By:

Date:

Party B - Printed Name:

By:

Date:

What the Preliminary Legal Agreement Is and When It’s Used

A Preliminary Legal Agreement is an initial written record that sets out core terms, parties, and conditional obligations prior to a fully executed final contract. It can capture negotiated points, an agreed framework for later drafting, or interim rights and responsibilities while parties complete due diligence. This document is commonly used to preserve bargaining positions, set deadlines for finalization, and clarify whether the preliminary terms are binding or merely an expression of intent. Use clear language to state whether signatures create enforceable obligations or only a nonbinding memorandum of understanding.

Why a Clear Preliminary Legal Agreement Matters

A concise preliminary agreement reduces ambiguity, preserves negotiating positions, and documents timelines and key obligations. It helps avoid disputes over intent and provides a reference for final contract drafting while parties complete approvals or regulatory checks.

Who Typically Prepares and Signs This Agreement

Organizations and individuals use preliminary agreements when parties want to lock in material terms while final documentation is prepared.

Corporate counsel and business development teams negotiating deal terms and timelines for larger transactions.
Real estate brokers and buyers when setting the basic sale or lease framework prior to closing.
Service providers and clients agreeing on scope, pricing, and milestones before issuing a full master services agreement.

Use the document only after confirming signatory authority and whether the parties intend the document to be binding or nonbinding.

Typical Signers and Their Roles

Company Signatory

Chief operating officers, general counsel, or authorized officers commonly sign on behalf of a corporate party; confirm that the signer has board or delegated authority to bind the entity, especially for material obligations or financial commitments.

Individual Signer

For sole proprietors or individuals, the signatory should use their full legal name as it appears on government ID; mismatch between contract name and tax records can create enforcement issues or trigger withholding obligations.

Core Elements to Include in a Professional Preliminary Legal Agreement

A well-structured preliminary agreement states parties, scope, timing, binding status, dispute resolution, and termination mechanics so later drafting is faster and risks are contained.

Parties

Identify each party using full legal names and business entity types so the eventual contract references correct corporate or individual legal identities.

Scope

Summarize the core subject matter and deliverables to prevent scope creep and to guide the final agreement’s exhibits and SOWs.

Term & Deadlines

State effective date, negotiation deadlines, and any automatic expiration to avoid open-ended obligations or unintended performance triggers.

Binding Intent

Specify whether the document is binding, partially binding (e.g., confidentiality, exclusivity), or nonbinding to remove ambiguity about enforceability.

Consideration

Describe the consideration or commitment (monetary, exclusivity, deposit) so courts can assess contract formation elements if disputed.

Governing Law

Choose the governing state law and venue to reduce forum disputes and align with the parties’ regulatory and operational context.

Step-by-Step: Completing and Executing the Preliminary Agreement

Follow these sequential steps to prepare, review, and sign a Preliminary Legal Agreement so the parties’ intentions are clear and risk is minimized.

01

Draft core terms: List parties, scope, dates, and any payments.
02

Mark binding items: Specify confidentiality or exclusivity as binding clauses.
03

Legal review: Have counsel confirm authority and regulatory issues.
04

Execute and distribute: Sign, date, and share final copies with audit trail.

Typical Workflow from Draft to Final Contract

A predictable workflow reduces negotiation friction and documents decision points that will feed into the final agreement.

Drafting: Prepare a concise term summary for negotiation.
Internal approvals: Obtain budgetary and legal sign-offs before sending.
Counterparty review: Exchange edits and resolve material differences.
Execution: Sign and record the document for reference.

Digital Workflow Settings to Consider

When configuring an online signing workflow, set authentication, field rules, and routing to match the agreement’s sensitivity and required approvals.

Field	Configuration
Signer Authentication	Email link, SMS code, or KBA depending on risk
Required Fields	Make names, dates, and initials mandatory
Routing Order	Set sequential or parallel signing as needed
Audit Trail	Capture IP, timestamp, and signer actions

Digital Signing and Platform Considerations

Choose eSignature settings that match the agreement’s legal and operational needs, including authentication and retention.

Integrations: Salesforce, NetSuite, Microsoft 365 supported
File formats: PDF, DOCX, and HTML input/output
Authentication: Email, SMS, KBA, or advanced options

Ensure the chosen platform supports required audit trails, secure storage, and any necessary compliance addenda such as a BAA for HIPAA-covered data.

Common Timeframes and Deadlines to Include

Define specific dates and durations to avoid misunderstandings; clear deadlines also determine when remedies or termination rights arise.

Effective Date:

Date when the agreement’s stated obligations begin

Negotiation Period:

Number of days for final contract drafting and review

Execution Deadline:

Date by which signatures must be obtained

Right to Rescind:

Time window parties have to withdraw if specified

Document Retention:

Timeframe to keep executed copies for records

Key Milestones from Draft to Finalization

Track milestone stages so each party knows when reviews, approvals, and signature events must occur.

01

Initial Draft Prepared

Create the preliminary terms and circulate internally

02

Counterparty Review

Receive edits and negotiate outstanding items

03

Final Legal Review

Confirm authority, compliance, and risk allocation

04

Execution & Distribution

Obtain signatures and record in document repository

Common Mistakes to Avoid When Preparing a Preliminary Agreement

Leaving the binding status ambiguous, which can prompt litigation over intent and enforceability.
Using imprecise party names or entity identifiers that later prevent enforcement or cause tax reporting errors.
Omitting key dates or payment terms that lead to disputes about performance triggers and deadlines.
Failing to secure appropriate signer authority or approvals before circulating for signature.

Potential Consequences of an Incorrect or Incomplete Agreement

Unenforceability: Court may find no binding contract

Litigation Costs: Increased legal and discovery expenses

Reputational Risk: Damaged business relationships and trust

Regulatory Exposure: Fines if regulated data mishandled

Tax Consequences: Withholding or reporting errors may follow

Loss of Rights: Missed deadlines can forfeit contract claims

Security and Compliance Considerations for Electronic Execution

Encryption: TLS 1.2/1.3 in transit; AES-256 at rest

Certifications: SOC 2 Type II and ISO 27001 certified

HIPAA: HIPAA-compliant workflows; BAA required

21 CFR Part 11: Supports FDA-regulated signature controls

Audit Trail: Timestamps, IP, and action logs retained

Accessibility: WCAG 2.0 Level AA accessibility support

How Organizations Use Preliminary Agreements in Practice

These real-world examples show common uses and operational benefits of documenting preliminary terms before final contract execution.

Optica Ventures — COO

Optica used a short preliminary agreement to document financing milestones and deadlines

The concise form reduced negotiation cycles by clarifying payment triggers
This helped preserve negotiating leverage while counsel drafted a comprehensive investor agreement and ensured alignment across internal stakeholders.

Xerox — Director

Xerox used a preliminary terms sheet for systems integration scope

It captured responsibilities and timelines
The recorded terms simplified conversion into a master services agreement, reduced disputes over deliverables, and kept vendor onboarding on schedule.

eSignature Vendor Pricing and Feature Snapshot Relevant to Preliminary Agreements

This vendor snapshot compares starting price and select feature availability; signNow is listed first per vendor ordering rules.

	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	Yes, trial available	Yes, trial available	Yes, trial available	Yes, trial available
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
Envelope Cap	No cap	100 envelopes/user/year	No cap	No cap	No cap

Frequently Asked Questions About Preliminary Legal Agreements

Answers to common procedural and legal questions about drafting, signing, and preserving preliminary agreements.

Need help? Contact support

Can this be signed electronically?
Yes. Electronic signatures are generally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most jurisdictions, provided the transaction is not an exception (for example, wills or certain court filings). Ensure intent and consent are documented.
When is notarization required?
Notarization depends on state law and the document’s purpose. Some states require notarization for specific conveyances or powers. Verify state requirements before assuming notarization is optional.
Do witnesses need to sign?
Witness requirements vary by state and document type. For most business preliminary agreements witnesses are not required, but certain jurisdictions and transaction types may demand one or more witnesses.
How should confidential terms be protected?
If confidentiality is intended to be binding, include a clear confidentiality clause and mark it as binding; for PHI, add HIPAA-compliant language and execute a BAA where applicable.
What happens if a party lacks signing authority?
A signature by an unauthorized person can render the agreement voidable. Confirm authority with corporate resolutions or officer certifications prior to execution to avoid disputes.
How long should I retain executed copies?
Retain executed agreements for at least the active term plus three years; follow industry rules (e.g., IRS, HIPAA) for longer retention as required by statute or regulation.

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