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Heads of Terms

If you or your business require assistance with preparing a Heads of Terms document, Blacks Solicitors’ Corporate team can help.

Heads of Terms are an important first step in any acquisition or disposal of a business. They set out the principle terms of a transaction and lay down the foundations for the negotiations and thereafter the transaction agreements. They can be used to focus the minds of the parties and aid in aligning the parties to a single common objective.

Heads of Terms in their entirety are not legally binding, save usually for a few specific obligations (see below). This however does not negate the usefulness of them as parties often regard them as morally binding, which can be a crucial factor should any disagreement arise. Which in turn has the potential to speed up the negotiation process, saving clients both time and money, should any disagreement arise.

In addition by providing a clear, structured set of key terms the parties not only benefit from the foreseeability provided, but they also have access to a useful tool when instructing external advisers.

By setting out and agreeing the headline terms of a deal the parties have clarity on the terms, and can determine if a deal can be agreed before parties incur significant fees on Due Diligence and transaction documents.

Frequently Asked Questions

Why do I need Heads of Terms?

Well drafted Heads of Terms provide clarity to any business transaction. Heads of Terms enable ongoing discussions to be formalised and speed up the process of drafting transactional documents. Specific clauses can also be used to protect your valuable business information and provide you with an exclusivity period so that negotiations won’t be jeopardised by the involvement of a third party.

Are Heads of Terms Legally Binding?

Most obligations in Heads of Terms are not usually legally binding. There are, however, a number of provisions which can be added to confer legally binding obligations, such as:

Confidentiality – parties can be prevented from discussing the terms of the deal, and even the existence of the deal.

Exclusivity – parties can be prevented from entering into negotiations with third parties for a specified period of time.

Restrictions – parties can agree certain restrictive covenants including non-solicitation of staff, customers, and suppliers.

 

For more information on the above, or to find out how Blacks’ Corporate team can assist you with Heads of Terms, please email or call us today on 0113 207 0000.

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