Drafting Heads of Agreement (UK)

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Heads of Agreement (HOAs) are an essential document for any business arrangement, no matter how large or small. These agreements between two parties outline the key points of the agreement and ensure that all involved understand the terms and consequences should either fail to meet their obligations. Not only do they provide peace of mind for both parties, but also a legal basis which can be used should further negotiation be required.

The Genie AI team are strong advocates of having an HOA in place when entering into any contract; it helps protect the interests of all involved and sets out clear details as to what each party is responsible for. Payments due, responsibilities and potential remedies should someone breach the agreement can all be outlined in a comprehensive format, with intellectual property remaining secure throughout.

It’s not just piece-of-mind that HOAs offer up; they can also help avoid disputes prior to signing on the dotted line. By outlining both parties’ rights and obligations clearly in one document misunderstandings can be avoided - settling any potential issues before they arise instead of battling them out through costly legal channels down the line.

So whether you’re entering into an agreement with another business or individual, investing in property or even setting out details between founders within your own start-up company; investing time into creating a Heads of Agreement is invaluable for ensuring everyone is aware of where they stand now - and what would happen if something went wrong later down the track.
For full step-by-step guidance on drafting Heads of Agreement (UK), plus access to our template library today, read on below!

Definitions (feel free to skip)

Agreement: A legally binding contract between two or more parties.
Rights and Obligations: The duties and responsibilities that each party to the agreement must meet.
Legal Effect: The legal implications of the agreement, such as whether or not it is legally binding and any disclaimers that might be included.
Dispute Resolution Mechanisms: The strategies and methods used to resolve conflicts between the parties.
Applicable Laws: Laws or regulations that may affect the agreement, such as consumer protection laws or tax laws.

Contents

• Defining the Agreement
• Setting out the purpose of the agreement
• The parties involved
• The duration of the agreement
• Identifying the Rights and Obligations of Each Party
• Outlining the rights and obligations of each party to the agreement
• Duties and responsibilities
• Payment of fees
• Any other conditions that must be met
• Determining the Legal Effect of the Agreement
• Setting out the legal implications of the agreement
• Whether or not it is legally binding
• Any disclaimers that might be included
• Establishing Dispute Resolution Mechanisms
• Setting out the dispute resolution mechanisms that will be used in the event of a dispute between the parties
• Researching Applicable Laws
• Researching any laws or regulations that might affect the agreement
• Consumer protection laws
• Tax laws
• Drafting the Agreement
• Drafting the agreement itself
• Ensuring that the language is precise
• All of the relevant details are included
• Reviewing and Editing the Agreement
• Reviewing and editing the agreement
• Making sure that all of the terms are properly understood by both parties
• Obtaining the Necessary Signatures
• Obtaining the signatures of both parties to the agreement
• Filing the Agreement
• Filing the agreement with the appropriate government agency, if necessary
• Finalizing the Agreement
• Signing the agreement
• Making sure that both parties understand the terms and conditions

Get started

Defining the Agreement

• Understand the purpose of the agreement and the context in which it was created.
• Determine the parties involved in the agreement and ensure that they are legally capable of entering into a binding contract.
• Set out the statutory and common law framework that applies to the agreement.
• Consider the specific terms of the agreement and list them in a clear and concise manner.
• Ensure that the terms are complete and unambiguous as far as possible.
• Draft a non-binding cover letter that sets out the parties’ intention to enter into the agreement.

When you can check this off your list and move on to the next step:
• Confirm that the parties involved in the agreement have read and agreed to the terms of the agreement.
• Ensure that all relevant information has been included in the agreement and that it is accurate and up to date.
• Obtain any necessary permissions or consents that are required to enter into the agreement.

Setting out the purpose of the agreement

• List the purpose of the agreement and why it is necessary
• Make sure that the purpose of the agreement is clear and unambiguous
• Avoid using language which is too broad or vague
• Include details such as the names of the parties, the date the agreement is being drafted, the expected timeframe for completion of the agreement, and the intended outcome
• When you have set out the purpose of the agreement, you can move on to the next step.

The parties involved

• Identify the parties to the agreement, including their full names and any other relevant information
• If the parties are companies, include the company registration numbers and their registered offices
• Confirm the parties’ agreement to the contract by having each party sign the document
• When all parties have signed the document, the agreement is complete and binding
• Check this off your list and move on to the next step: setting out the duration of the agreement.

The duration of the agreement

• Consider how long the agreement should last
• Specify start and end dates for the agreement
• Outline any circumstances that may cause the agreement to end early
• Ensure the agreement is legally binding and enforceable
• When you are happy with the duration of the agreement, save it to your documents and move on to the next step.

Identifying the Rights and Obligations of Each Party

• Identify the rights and obligations of each party that are relevant to the agreement.
• Consider the type of rights and obligations that each party is obligated to fulfill.
• Write down each party’s rights and obligations in the Heads of Agreement.
• Ensure that the rights and obligations are clear, specific, and unambiguous.
• When all the rights and obligations have been identified and written down, the parties should sign and date the Heads of Agreement.

How you’ll know when you can check this off your list and move on to the next step:

• Once all the rights and obligations of each party have been identified and written down, the parties should sign and date the Heads of Agreement.

Outlining the rights and obligations of each party to the agreement

• Draft the rights and obligations of each party to the agreement in a clear and concise manner
• Ensure the rights and obligations of each party are unambiguous and specific
• Consider any applicable laws that may affect the agreement
• Make sure the agreement is compliant with applicable laws
• When drafting the rights and obligations, consider the needs of both parties
• When drafting each right and obligation, consider the remedies available in the event of breach
• When you are satisfied that the rights and obligations of both parties are outlined clearly and concisely, you can check this off your list and move on to the next step.

Duties and responsibilities

• Outline the duties and responsibilities of each party in the agreement
• Make sure the duties and responsibilities of each party are clear and unambiguous
• Make sure the duties and responsibilities of each party are consistent with the rights and obligations of each party that were outlined in the previous step
• Make sure that each party is aware of the duties and responsibilities that they are responsible for
• All parties should agree to the duties and responsibilities as outlined in the agreement
• Once all parties have agreed to the duties and responsibilities, they can be included in the Heads of Agreement

How you’ll know when you can check this off your list and move on to the next step:

• All parties should have agreed to the duties and responsibilities outlined in the agreement
• All parties should have signed the agreement and agreed to the duties and responsibilities outlined in it

Payment of fees

• Agree on the payment terms for the agreement - this should include the amount of fees to be paid, the timescale of payment, and any other details regarding the payment.
• If applicable, consider adding a clause that states that any fees not paid on time will incur a late payment fee.
• Ensure that all parties understand and agree to the payment terms and sign the agreement to confirm.
• Once all parties have signed off the agreement, this step is complete - you can move on to the next step.

Any other conditions that must be met

• Determine any additional conditions that must be met before the agreement is legally binding, such as the parties obtaining legal advice or a specific number of signatures
• Consider any other items that the parties agree to, such as indemnification of losses or dispute resolution
• Make sure to include any additional conditions in the Heads of Agreement
• When all additional conditions have been agreed to, the parties can sign the Heads of Agreement and make it legally binding.

Determining the Legal Effect of the Agreement

• Understand the legal effect of the document. The document should clearly state whether it is legally binding or not.
• Consider which law will govern the agreement. This will depend on the parties involved and the subject matter of the agreement.
• Determine the circumstances in which the agreement will be terminated.
• When you are satisfied that you have understood the legal effect of the agreement, you can move on to the next step: setting out the legal implications of the agreement.

Setting out the legal implications of the agreement

• Understand and consider any applicable laws, regulations and statutory requirements
• Consider and understand any legal rights and obligations that apply
• Understand and consider any potential legal risks and liabilities
• Identify any provisions that could be made to limit or manage legal risks
• Draft any applicable legal provisions into the agreement
• When you are satisfied that all the legal implications have been considered, the agreement should be checked by a qualified legal professional
• Once the legal professional has provided their approval, the agreement is ready to move on to the next step.

Whether or not it is legally binding

• Consider the terms of the agreement and whether to make it legally binding or not
• Discuss the options with a lawyer, who can advise on the best option for the situation
• Establish which parties are legally obligated to fulfil their obligations as laid out in the agreement
• Agree on which parts of the agreement are legally binding and which are non-binding
• Make sure to include a clause in the agreement stating that it is legally binding
• Once these considerations have been taken into account and you have decided on the legal nature of the agreement, the next step can be completed.

Any disclaimers that might be included

• Consider the need for any disclaimers to protect the interests of all parties involved in the agreement
• Consider including a disclaimer of warranties, which means that all parties agree that they are not providing any express or implied warranties
• Consider including a disclaimer of liability, which means that all parties agree to limit their liability in respect of any loss or damage that may be suffered as a result of their involvement in the agreement
• When you have considered the need for any disclaimers, decide whether to include them in the agreement and draft them accordingly
• When you have drafted any disclaimers, be sure to include them in the agreement
• Once all disclaimers have been included in the agreement, you can move on to the next step in the guide.

Establishing Dispute Resolution Mechanisms

• Identify the dispute resolution mechanisms the parties are willing to use, such as arbitration, litigation, and mediation
• Determine which dispute resolution process they would prefer and whether they want to use a single or a multi-tiered process
• Agree on the location of the dispute resolution, what law will be applied, and who will be involved in the process
• Specify the details of the process, such as the language, the fees, and the process for making and enforcing any awards
• Draft and negotiate the dispute resolution clauses in the Heads of Agreement and ensure they are in line with the terms of the agreement
• Once all parties have agreed on the dispute resolution provisions, the Heads of Agreement can be signed
• Check off this step and proceed to the next step.

Setting out the dispute resolution mechanisms that will be used in the event of a dispute between the parties

• Identify the type of dispute resolution mechanisms that will be used (e.g. arbitration, mediation, litigation).
• Agree on the governing law that will be applied in the event of a dispute.
• Consider the costs associated with the dispute resolution mechanisms.
• Agree on the venue for the dispute resolution and the selection of arbitrators/mediators.
• Specify the time period for the dispute resolution.
• Agree on the language that will be used in the dispute resolution proceedings.
• Detail the costs that will be incurred by each party.

When you can check this off your list and move on to the next step:

• Once all parties have agreed on the dispute resolution mechanisms, the applicable laws, the venue, the time period, the language, and the costs, you can move on to researching applicable laws.

Researching Applicable Laws

• Check with the relevant authorities (local, national, and international, if applicable) to make sure that each of the terms in the Heads of Agreement are in compliance with applicable laws and regulations.
• Research any existing laws or regulations that could impact the agreement, such as employment, health and safety, or taxation regulations.
• Check with legal counsel to ensure that the agreement is in compliance with all applicable laws.

Once you have completed your research and are confident that the agreement is in compliance with the relevant laws, you can check this off your list and move on to the next step.

Researching any laws or regulations that might affect the agreement

• Identify and review the applicable laws in the UK, including contract law, consumer protection, data protection, and other relevant legislation.
• Use government websites and legal databases to ensure that you are up to date with all the relevant laws.
• Check whether the agreement needs to comply with any specific regulations or industry standards.
• Once you have researched all the applicable laws and regulations, you can then move on to the next step.

Consumer protection laws

• Research the Consumer Rights Act 2015, Sale of Goods Act 1979, and Unfair Contract Terms Act 1977, to determine whether any of the terms of the Heads of Agreement may breach any of these laws
• Familiarize yourself with the Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, to ensure the Heads of Agreement does not breach any of these regulations
• Understand the implications of the Consumer Rights Act 2015 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 for any distance and off-premises contracts outlined in the Heads of Agreement
• Once you are confident that none of your proposed terms breach any consumer protection laws or regulations, you can move on to researching and understanding the relevant tax laws.

Tax laws

• Research applicable tax laws and make sure you are up-to-date with the most recent changes
• Discuss tax implications with both parties and make sure all parties understand the potential outcomes
• Note any specific tax treatment to be applied
• Ensure that the agreement outlines the tax implications and that both parties agree to the same
• Confirm which party will be responsible for payment of taxes
• Once you have considered all the tax implications, you can check this off your list and move onto drafting the agreement.

Drafting the Agreement

• Consult with a lawyer to draft a heads of agreement document
• Provide details such as the nature and purpose of the agreement, the parties involved, and any applicable terms and conditions
• Consider the legal implications of the agreement, such as the applicability of contract law, the laws of the jurisdiction, and tax laws
• Make sure the document is clear and comprehensive, and all relevant information is included
• Review the document with both parties to ensure it is accurate and meets all requirements
• Have the document signed by both parties, and have each party keep a copy
• Once all steps are completed, the document is ready to be used as the basis of the agreement.

Drafting the agreement itself

• Draft the heads of agreement using a pre-drafted template or by creating your own
• Include all the appropriate details, including parties, purpose, and any commitments made
• Review and revise the heads of agreement to make sure everything is accurate and up-to-date
• Once you are satisfied with the content and accuracy of the heads of agreement, you can sign and execute the agreement
• You will know that you have completed this step when the heads of agreement are signed and executed by the parties involved.

Ensuring that the language is precise

• Read through the agreement line by line, and make sure that the language is precise and exact
• Pay close attention to any terms, definitions, or explanations that have been included in the agreement
• Check that all dates, times, and other details are included and accurate
• Make sure that any technical or legal jargon is explained in plain English
• Double-check any changes or amendments to ensure that they are accurate
• Once you have thoroughly reviewed the agreement, you can be confident that the language is precise and move on to the next step.

All of the relevant details are included

• Ensure that all relevant details are included in the agreement, such as:
• The names and addresses of the parties
• The date of the agreement
• The scope of the agreement
• The terms and conditions for the agreement
• Any applicable legal definitions
• The duration of the agreement
• The governing law
• Signatures
• Check that each of the above details has been included in the agreement.
• When all of the relevant details have been included, you can move on to reviewing and editing the agreement.

Reviewing and Editing the Agreement

• Carefully review the heads of agreement to ensure that all of the details are accurate and in line with the initial negotiations.
• Check that all of the necessary legal terminology is properly used.
• Look for any omissions or errors and make the necessary corrections or additions.
• Check that the agreement is in compliance with all applicable laws and regulations.
• Once you have completed the review and editing process, you can finalize the document.

Reviewing and editing the agreement

• Carefully read through the draft agreement and make any changes that are necessary
• Pay special attention to the definitions, legal definitions, and any other technical language that is used in the agreement
• Make sure that all of the terms are clearly stated and that there are no ambiguities
• Make sure that the agreement meets the required standards of the relevant laws
• Ensure that all the parties are in agreement with the terms of the agreement
• Make sure that the agreement is properly formatted, with all of the necessary information
• Check that all the parties have signed the agreement
• Once all of the above checks have been completed, you can check this step off your list and move onto the next step.

Making sure that all of the terms are properly understood by both parties

• Ask questions of any unclear or ambiguous terms
• Check that both parties understand all of the terms and agree
• Ensure that both parties have read and understood the entire document
• Make sure that both parties know what they are responsible for
• Confirm that all parties are clear on the terms
• When everyone is confident that all terms are understood and agreed upon, you can check this off the list and move on to obtaining the necessary signatures.

Obtaining the Necessary Signatures

• Obtain the signatures of both parties to the agreement.
• Ensure that each party has a copy of the Heads of Agreement, including any annexes and/or schedules.
• Have the parties confirm that they have read, understood, and agreed to the terms of the Heads of Agreement.
• Record the date of signing.
• Once all of the steps above have been completed, you can move on to the next step.

Obtaining the signatures of both parties to the agreement

• Both parties should obtain independent legal advice before signing the agreement
• Once both parties have each received independent legal advice, both parties should sign the agreement
• Make sure to check that each signature is witnessed by an independent third party
• Once the agreement has been signed and witnessed, both parties should be given a copy of the agreement
• You can check this step off your list once both parties have signed the agreement and each been provided with a copy.

Filing the Agreement

• Obtain a certified copy of the signed agreement
• File the original agreement with the appropriate government agency, if necessary
• Retain a copy of the agreement for your records

Once you have obtained a certified copy of the signed agreement and filed the original with the appropriate government agency, if necessary, you can check this off your list and move on to the next step.

Filing the agreement with the appropriate government agency, if necessary

• Check if filing the agreement with the appropriate government agency is necessary - this will vary depending on the jurisdiction and the nature of the agreement
• If filing is required, locate the appropriate government agency and determine the necessary filing procedures
• Gather the necessary documents and information required for filing, such as copies of the agreement, identifying information for the parties, and any applicable fees
• Follow the procedures for filing the agreement with the appropriate government agency
• Once the agreement has been filed, the agency will provide a confirmation or receipt of filing
• Check off this step as complete when the confirmation or receipt of filing has been received

Finalizing the Agreement

• Review the agreement thoroughly for accuracy and completeness
• Make any necessary amendments and incorporate them into the agreement
• Obtain legal advice, if necessary
• Have each party to the agreement sign two copies of the agreement
• Exchange the signed copies of the agreement
• When all parties have signed the agreement, you can check this off your list and move on to the next step of signing the agreement.

Signing the agreement

• Obtain original signed hard copies of the Heads of Agreement from all relevant parties
• Make sure each party has the same version and that all the parties have signed the document
• Check that the document is properly executed and includes the original signatures of all parties
• Keep an electronic copy of the signed agreement for your records
• Once all parties have signed the original document and you have kept an electronic copy, this step can be checked off your list.

Making sure that both parties understand the terms and conditions

• Both parties should read through the agreement in full to ensure they understand the terms and conditions.
• Both parties should discuss any questions or queries that arise from the agreement.
• Once both parties are happy with the agreement and have no further questions, they will be able to sign the agreement and move on to the next step.

FAQ:

Q: What is the difference between a Heads of Agreement and a Contract?

Asked by Grace on January 17th 2022.
A: A Heads of Agreement (HOA) and a Contract are two different documents. A HOA is an informal document that sets out the basic terms of an agreement, outlining the general terms and principles that will be used to govern the relationship between the parties. It is usually used in the early stages of a business relationship and is not legally binding, although it may be used as the basis for more formal legal contracts at a later stage. A Contract, on the other hand, is a legally binding document which outlines the specific terms and conditions of an agreement between two or more parties. It will usually include more detailed information than a HOA, such as the parties’ obligations, timelines and any applicable penalties for breach of contract.

Q: What is the role of consideration in a Heads of Agreement?

Asked by Michael on August 26th 2022.
A: Consideration is an important element in a HOA, as it establishes mutual obligations between the parties involved in the agreement. Consideration is something which each party agrees to exchange for something of value – this could be money, services or goods. Consideration should be expressed clearly in the HOA; for example, if one party agrees to provide services in exchange for payment from the other party, this should be specified clearly with agreed-upon amounts or dates for payment. Without consideration, there may be no legal basis for enforcing any part of the agreement.

Q: How can I ensure that my Heads of Agreement meets UK legal requirements?

Asked by Abigail on April 14th 2022.
A: It is important to ensure that your HOA meets UK legal requirements to make sure that it is enforceable if necessary. To ensure this, you should seek advice from a qualified UK lawyer who can advise you on any specific laws that are applicable to your particular agreement. You should also make sure that all terms are clearly stated in plain language so that they are easily understood by all parties involved in the agreement, and make sure that all parties are aware of their respective rights and obligations under the agreement. Finally, it is important to include an arbitration clause so that any disputes arising from the agreement can be resolved without recourse to court proceedings.

Q: Can I draft my own Heads of Agreement?

Asked by Joshua on July 5th 2022.
A: While it may be possible to draft your own HOA, it is important to remember that a HOA is a legally binding document and should therefore be drafted with care. If you are not familiar with UK law or do not have experience in drafting legal documents, it may be advisable to seek advice from a qualified lawyer who can assist you in drafting a document which meets UK legal requirements and reflects your particular needs. This will help ensure that your HOA is legally enforceable if necessary and will protect both yourself and any other parties involved in the agreement.

Q: Is it necessary to register a Heads of Agreement?

Asked by Emma on February 28th 2022.
A: Generally speaking, HOAs do not need to be registered with any official body in order for them to be legally enforceable in the UK. However, there may be some instances where registration would be required; for example, if you enter into an HOA relating to land or property then you may need to register it with HM Land Registry. Similarly, certain types of HOAs may need to be filed with Companies House if they relate to corporate entities or companies registered in England or Wales. If you are unsure whether registration would be necessary in your particular case, it is advisable to seek advice from a qualified lawyer.

Q: Is it necessary to have all parties sign a Heads of Agreement?

Asked by Benjamin on March 22nd 2022.
A: Yes - all parties involved in a HOA must sign it before it can become legally binding in England and Wales (or elsewhere). Signing serves as evidence that all parties agree with and accept the terms of the agreement; without signatures from each party involved, there may be no legal basis for enforcing any part of it should a dispute arise at some point in future. Signatures also serve as proof that each party has read and understood the entire document before entering into it – this helps protect both yourself and any other parties involved from potential misunderstandings or miscommunication at later stages.

Example dispute

Suing a Company for Breach of a Heads of Agreement

• A plaintiff may raise a lawsuit against a company for breach of a Heads of Agreement.
• In order to win, the plaintiff must be able to prove that a legally binding agreement was in place that the company breached.
• This can be done by providing evidence of the agreement, such as a signed contract, emails, or text messages.
• The plaintiff must also prove that the company breached the agreement and that this breach caused them some form of harm or loss.
• The plaintiff may be able to recover damages for the harm or loss caused by the breach. These damages may include lost wages, medical bills, or other expenses.
• The plaintiff may also seek an injunction, which is a court order requiring the company to take a certain action or refrain from taking a certain action.
• Settlement may be reached through negotiation or mediation. In some cases, the court may order the parties to attend mediation or arbitration in order to try to reach a settlement.
• If damages are awarded, the amount may be determined by the court or agreed upon by the parties.

Templates available (free to use)

Heads Of Agreement

‍