Drafting Heads of Terms Quickly (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 terms are an integral part of any business contract negotiation in the UK, providing a clear framework for the two parties to agree upon and commit to. Not only do they help to avoid costly delays and disputes down the line, they also serve as a legal document that can minimise future disagreements and offer protection to all parties involved.

Furthermore, heads of terms can be used as a strong foundation on which to build more complex contracts. They provide clarity and certainty on the key points of agreement so that when it comes to discussing specific details, negotiations can take place more quickly and efficiently.

At Genie AI we understand how essential heads of terms are in protecting your interests during business negotiations. That’s why our team have developed what is now the world’s largest open source legal template library – allowing anyone access high quality legal documents with just a few clicks - without having to pay for specialist lawyers or spend time negotiating over basic points that should already be agreed upon.

Our step-by-step guidance offers an easy way for you to draft your own heads of terms, along with information on how you can access our template library today - meaning you won’t need a Genie AI account either. With millions of datapoints teaching Genie’s AI what constitutes market-standard heads of terms, rest assured you’re in safe hands when it comes to securing yours! Read on below for further information…

Definitions (feel free to skip)

Heads of Terms: A written document outlining the key points of an agreement between two or more parties. It serves as a foundation for the agreement, setting out the main terms and conditions that are to be included.
Non-binding: Not legally obligated to fulfill the terms of the agreement.
Parties: Individuals or organizations involved in an agreement.
Roles: Responsibilities of each party involved in an agreement.
Legal Terms: Conditions, restrictions or obligations that are legally required to be included in an agreement.
Timeline: Deadline or milestones that must be met in order to fulfill the terms of the agreement.
Plain English: Language that is easy to understand and avoids overly legal or technical language.
Negotiations: A collaborative process between two or more parties to come to a mutually beneficial agreement.
Agreement: A legally binding contract between two or more parties.
Witness: A third party who oversees the signing of an agreement and verifies that it is valid.
Confidentiality Clause: A clause that requires the parties involved to keep certain information private.
Indemnity Clause: A clause that requires one party to cover the losses or damages incurred by the other party.
Limitation of Liability Clause: A clause that limits the liability of one or both parties in case of breach or damages.
Dispute Resolution Clause: A clause that outlines the process for resolving disputes between the parties.
Payment Terms Clause: A clause that outlines the payment terms of an agreement.

Contents

• Understanding the purpose and scope of Heads of Terms
• What is a Heads of Terms document?
• What types of agreements require Heads of Terms?
• Defining the parties and their respective roles
• Who are the parties involved?
• What roles will each party take?
• Identifying the key terms and conditions of the agreement
• What legal terms need to be included?
• What is the timeline for the agreement?
• Drafting the Heads of Terms document
• What should be included in the document?
• What format should be used?
• Negotiating and agreeing on the Heads of Terms document
• How to approach negotiations?
• What to do when an agreement cannot be reached?
• Signing and finalizing the Heads of Terms document
• How to ensure the document is valid?
• What to do when the document is signed?
• Reviewing the Heads of Terms document
• What to look for when reviewing?
• How to make changes to the document?
• Examples of common clauses used in the UK
• What are some common clauses used in the UK?
• What are some best practices for using these clauses?
• Tips for drafting Heads of Terms with clarity and precision
• What should be done to ensure accuracy?
• What should be done to make the document clear?
• Preparing for the implementation of the agreement
• What needs to be done to prepare for implementation?
• What should be considered when planning the implementation?

Get started

Understanding the purpose and scope of Heads of Terms

• Understand the purpose of Heads of Terms and what it will cover, such as an overview of the main points of the deal
• Identify the parties to the deal and the main points of the deal
• Consider what is outside the scope of the Heads of Terms document
• Research legal and industry standards to ensure the document is compliant
• When you have a clear understanding of the purpose and scope of the Heads of Terms document, you can move on to the next step.

What is a Heads of Terms document?

• A Heads of Terms document is an agreement between two or more parties that sets out the main points of a contract to be discussed, negotiated and agreed upon.
• It is not a legally binding agreement, but rather a document that outlines the key issues to be addressed in the legal contract that will follow.
• It is usually used to help the parties come to an agreement more quickly and with less risk of disagreement.
• The document should include the names of the parties involved, the purpose of the agreement, the scope of the agreement and any other relevant information that the parties agree on.

You can check this off your list and move on to the next step when you have a clear understanding of what a Heads of Terms document is, the purpose and scope of such a document and when it is used.

What types of agreements require Heads of Terms?

• Any agreement that involves more than one party, such as a contract between a customer and supplier, should include Heads of Terms
• Heads of Terms are also necessary for a joint venture between two or more companies
• Heads of Terms should also be agreed upon for a franchise agreement
• If you are setting up an LLP, you should also draw up Heads of Terms

Once you have identified the type of agreement requiring Heads of Terms, you can move on to the next step of defining the parties and their respective roles.

Defining the parties and their respective roles

• Identify who is involved in the agreement and what their roles are
• List the names of the parties and their roles in the agreement
• Make sure that all parties involved are clearly identified and their roles are clearly defined
• Include any external advisors or other third parties who are involved
• Include details of any third party beneficiaries
• Check that everyone involved and their roles are correct

Once you have identified and listed all parties involved in the agreement and their respective roles, you can move on to the next step.

Who are the parties involved?

• Identify the parties to the transaction - who are the buyers and who are the sellers?
• Ensure that the parties are correctly named in the Heads of Terms document.
• Make sure that you have the correct contact details for the parties.
• Confirm the details of any legal representatives or advisors.
• When you are confident that all the necessary details are included, you can check this step off your list and move on to the next step.

What roles will each party take?

• Determine the roles that each party will take on.
• Figure out who will be responsible for what.
• Ensure that the roles are clear and that each party is aware of their responsibilities.
• Consider if there are any roles that need to be assigned to a third party.
• When you have determined the roles of each party, you can check this step off your list and move on to identifying the key terms and conditions of the agreement.

Identifying the key terms and conditions of the agreement

• Identify the key points of the agreement, such as the purpose of the agreement and any key obligations of the parties
• Consider which other terms may be necessary to make the agreement effective, such as termination provisions
• For commercial agreements, consider including the following points:
• Confidentiality
• Indemnity
• Intellectual property
• Force Majeure
• Dispute resolution

You can check this step off your list once you have identified all the key terms and conditions of the agreement.

What legal terms need to be included?

• Identify the essential legal terms that need to be included in the agreement. This will depend on the nature of the agreement.
• Consider the applicable law, including any statutory requirements or industry-specific regulations.
• Ensure that each party’s rights, obligations and liabilities are clearly set out.
• Include any provisions for dispute resolution and termination in the Heads of Terms.
• Check that any warranties, indemnities and other statements are drafted accurately and legally binding.
• Make sure that the document is legally enforceable.

You’ll know you can move on to the next step when you have identified all the essential legal terms and checked that they are legally binding and enforceable.

What is the timeline for the agreement?

• Establish the timeline for the agreement - how long will each step take?
• Agree upon a completion date for the agreement
• Identify any significant dates or events that must be taken into consideration
• Ensure that the timeline is reasonable and achievable
• Once you have agreed upon a timeline, document it in the Heads of Terms document
• You can check this off your list once the timeline has been agreed upon and documented.

Drafting the Heads of Terms document

• Establish the document structure: include a preamble, clauses, and a schedule of documents to be exchanged.
• Decide on the scope of the agreement: define the parties, the subject matter, and the period of the agreement.
• Set out the payment terms: specify the amount, currency, and payment schedule.
• Outline the confidentiality and intellectual property rights: establish each party’s rights and responsibilities in relation to confidential information and intellectual property.
• List any warranties, indemnities, and limitations of liability: detail the responsibilities of each party and the extent of their liability.
• Make any necessary provisions for dispute resolution: identify how and where any disputes will be resolved.
• When you have drafted the document, check that it is in accordance with the timeline and that all necessary provisions have been included.
• When you have checked the document, it is ready to be sent to the other party for review.

What should be included in the document?

• Parties: outline who is involved in the agreement
• Purpose: explain what the agreement is for
• Duration of Agreement: how long the agreement is expected to last
• Confidentiality: how the parties will protect confidential information
• Payment: outline how the parties will pay for services
• Termination: how the agreement can be ended
• Dispute Resolution: how any disputes will be resolved

Once you have included all of the points listed above in the document, you can check this step off your list and move on to the next step.

What format should be used?

• Draft the Heads of Terms on a plain document
• Use plain English and an easy to read format
• Keep it precise and clear
• Ensure that each point is properly numbered for ease of reference
• Add a revision history at the end of the document
• When you are satisfied with the formatting of the document, you can move on to the next step.

Negotiating and agreeing on the Heads of Terms document

• Start off with a draft of the Heads of Terms document and send it to the other party for review
• Discuss each clause in the document one by one and negotiate until both parties are in agreement
• Make sure to consider the interests of both parties and that the document is fair and equitable
• Once all the clauses have been agreed upon, sign the document and have it witnessed by an independent third party
• Once both parties have signed the document, you can check this off your list and move on to the next step.

How to approach negotiations?

• Understand the other party’s interests and objectives
• Be aware of the potential legal and commercial risks
• Prepare a detailed summary of what you have agreed on
• Put the agreement in writing in the form of Heads of Terms
• Make sure both parties agree to the terms and sign off on the document
• When both parties have signed off, you can move on to the next step.

What to do when an agreement cannot be reached?

• Consider seeking professional advice if negotiations have stalled
• Explore alternative methods for resolving the dispute such as arbitration or mediation
• If all else fails, consider taking legal action
• Once a conclusion has been reached, you can check this step off your list and move on to the next step of signing and finalizing the Heads of Terms document.

Signing and finalizing the Heads of Terms document

• Obtain the signature of all parties on the Heads of Terms document.
• Ensure that all parties have had the opportunity to seek legal advice before signing the document.
• Check that all parties have signed the document in the correct places.
• Have a witness present for the signing if possible.
• Exchange signed copies of the document with the other parties.
• When the document is signed and exchanged it is legally binding.
• You can check this off your list and move on to the next step.

How to ensure the document is valid?

• Ensure that the parties to the agreement are clearly stated in the Heads of Terms
• Cross-check that the document is properly signed and dated by both parties
• Confirm that the document has been witnessed if applicable
• Check that the language of the document is clear and unambiguous
• Make sure that the document complies with all applicable laws
• Verify that all necessary details are included, such as the subject matter of the agreement, the rights and obligations of the parties, and the dispute resolution process
• Review the document for any typos or errors

When these checks are done, you can be confident that the document is valid and ready for signing.

What to do when the document is signed?

• Ensure that the signed document is stored in a safe location and securely backed-up
• Make sure that all parties have a copy of the signed document
• Communicate to all parties that the document is now legally binding
• Check that all parties are in agreement that the document is valid and all necessary signatories have signed
• You will know you have completed this step when all parties have copies of the signed document and have confirmed that they agree it is legally binding.

Reviewing the Heads of Terms document

• Read through the document carefully, paying attention to the details and language
• Look for any discrepancies between the signed version and the original draft
• Ensure that there are no typos or other errors
• Check that the document is complete and all parties have signed
• Make sure that the document is dated correctly, and that it reflects the current date
• Confirm that all parties have been given a copy of the document
• Once you have confirmed all of the above, you have successfully reviewed the Heads of Terms document and can move on to the next step.

What to look for when reviewing?

• Check if the document captures the key commercial points of the transaction
• Review the accuracy of all the information included
• Ensure that all the essential terms are included
• Confirm that all the parties involved are named correctly
• Check for any potential legal risks that may be present
• Make sure all parties involved have agreed to the same terms
• Look for any typos or other errors
• Once you’ve gone through all the points, check off the task and move on to the next step.

How to make changes to the document?

• Use ‘track changes’ to make edits to the document
• Check the document to make sure that all changes have been accepted
• Open the ‘Review’ tab and use the ‘Accept’ button to accept all changes
• Save the document once all changes have been accepted
• You will know you can move on to the next step when the document has been saved with all changes accepted.

Examples of common clauses used in the UK

• Understand the scope of the deal: This clause should set out the main terms of the deal, such as the parties involved, the assets to be transferred, and the timeline for the deal.
• Consider the payment terms: This clause should detail the amount to be paid for the assets, the payment schedule, and any conditions for payment.
• Establish a timeline: This clause should specify when the agreement will come into effect and when it will end.
• Define the warranties: This clause should include any guarantees that the seller is making with respect to the assets.
• Set out the confidentiality clauses: This clause should ensure that both parties keep the details of the negotiations confidential.
• Outline the dispute resolution process: This clause should set out how any disputes between the parties will be handled.

You’ll know that you can check this off your list and move on to the next step when you have drafted all the clauses listed above.

What are some common clauses used in the UK?

• Familiarise yourself with the UK’s statutory and contractual framework
• Consider the purpose of the document and what you want to achieve
• Include clauses that set out the background to the agreement, the parties involved, and the purpose of the agreement
• Consider the payment terms and include details such as the amount due, how it will be paid, and when it is due
• Include clauses for confidentiality, dispute resolution and termination
• Include a clause for the entire agreement and any amendments to it
• Ensure that you include the full contact details of the parties

Checklist for this step:

• Familiarised yourself with the UK’s statutory and contractual framework
• Included clauses that set out the background to the agreement, the parties involved, and the purpose of the agreement
• Included clauses for payment terms, confidentiality, dispute resolution and termination
• Included a clause for the entire agreement and any amendments to it
• Ensured that you have included the full contact details of the parties

When all items on the checklist have been completed, you can move on to the next step.

What are some best practices for using these clauses?

• Read and understand the clauses thoroughly before using them.
• Consider the context of the agreement and ensure the clauses are tailored to the specific agreement.
• Check that the clauses are consistent with each other.
• Use plain language and avoid complex legal terminology.
• Make sure the clauses are clear and concise.
• Keep the clauses relevant to the negotiation.
• Avoid using ambiguous language.
• Ensure the clauses are consistent with applicable law.
• Check that the clauses are in line with the overall goal of the agreement.

Once the clauses have been read and understood, tailored to the specific agreement, and checked for consistency, clarity, and relevancy, they can be used in the agreement.

Tips for drafting Heads of Terms with clarity and precision

• Review the relevant laws and regulations applicable to the transaction.
• Make sure to include all key elements of the deal, such as the structure, the terms, and the payment obligations.
• Use plain language that is easy to understand and unambiguous.
• Consider the use of a check list to ensure that all essential elements are included.
• If the Heads of Terms are to be legally binding, the phrase “subject to contract” should be included.
• Ensure that all parties are in agreement on the terms of the agreement before signing.

When you’ve completed these steps, you can be sure that you have a well-drafted set of Heads of Terms that are clear and precise.

What should be done to ensure accuracy?

• Read the document multiple times to ensure accuracy
• Review all the terms and conditions and check for any inconsistencies
• Have a knowledgeable party review the document for accuracy
• If possible, have a lawyer review the document for accuracy
• Once all accuracy checks have been made, have each party sign the document
• Once all parties have signed the document, check again for accuracy
• Check off this step from the list and move on to the next step

What should be done to make the document clear?

• Consider the language used - keep it concise and precise
• Identify the key points that need to be included
• Ensure the document is consistent with the agreed terms
• Identify any potential ambiguities and revise the document accordingly
• Have the document reviewed by a lawyer to check for any potential legal issues

When you have completed this step, you will know if the document is sufficiently clear with no ambiguities.

Preparing for the implementation of the agreement

• Identify the parties to the agreement and their respective roles.
• Draft a schedule of key performance indicators (KPIs) to measure the parties’ compliance with their obligations.
• Draft a dispute resolution process to be followed in case of a potential breach of the agreement.
• Establish a timeline for implementation of the agreement.
• Agree on a clear system of communication between the parties.
• Have a lawyer review and advise on the Heads of Terms.

Once these steps have been completed, you can move on to the next step of the guide.

What needs to be done to prepare for implementation?

• Identify which parties will be involved in the agreement and the roles they will be playing
• Establish the timeline for the agreement to be signed and implemented
• Prepare a list of any necessary documents, such as financial statements, contracts, and other legal documents
• Determine the method of payment and any applicable taxes
• Agree on the applicable law and jurisdiction for the agreement
• When all of the above is completed, you can move on to the next step of planning the implementation of the agreement.

What should be considered when planning the implementation?

• Understand the scope of the project and ensure that all parties are aware of the scope and expectations
• Plan the timeline for the project, including the delivery of any goods or services, and when payment is due
• Consider any risks associated with the project such as unexpected delays, changes in the scope, or other external factors
• Establish the roles and responsibilities of each party in the project
• Identify any potential subcontractors or third parties that will be engaged
• Outline the communication and decision-making processes
• Determine the dispute resolution process
• When all the considerations have been taken into account, you will be ready to start drafting the Heads of Terms.

FAQ:

Q: What are the differences between Heads of Terms in the UK and other jurisdictions?

Asked by Ryan on March 15th 2022.
A: Heads of Terms in the UK may differ from other jurisdictions, for example in the USA or Europe. This is because the legal frameworks, regulations and laws governing contracts and agreements can vary from country to country. Generally speaking, Heads of Terms in the UK tend to include more specific information than those drafted in other jurisdictions, such as more details about the parties involved, the purpose of the agreement and any relevant timelines. Additionally, UK Heads of Terms often include clauses which are not necessary in other jurisdictions. Ultimately, each jurisdiction has its own particular requirements for drafting Heads of Terms, so it is important to ensure you are familiar with the laws and regulations applicable to the jurisdiction you are drafting for.

Q: What should I consider when drafting a Heads of Terms document?

Asked by Ella on April 25th 2022.
A: When drafting a Heads of Terms document there are several factors you should consider. Firstly, it is important to ensure that all relevant information regarding the parties involved and the purpose of the agreement are included. Additionally, you should consider whether any specific clauses need to be included that are not necessary in all contracts, such as confidentiality clauses or dispute resolution procedures. You should also ensure that all relevant timelines and deadlines are set out clearly and accurately. Finally, it is important to ensure that any clauses included comply with all applicable laws and regulations in order to ensure enforceability of the agreement.

Q: Are there any particular requirements for Heads of Terms documents in the technology sector?

Asked by Ethan on June 3rd 2022.
A: Depending on your particular industry or sector, there may be certain additional requirements when drafting a Heads of Terms document that apply to your business model or product/service offering. For example, if you are operating within the technology sector then you may need to include clauses relating to intellectual property rights or data protection requirements which would not usually be included in other types of contracts. It is therefore important to ensure that you are familiar with any specific rules or regulations applicable to your industry when drafting a Heads of Terms document.

Q: Is it possible to draft a Heads of Terms document quickly?

Asked by Noah on July 22nd 2022.
A: Yes, it is possible to draft a Heads of Terms document quickly if you have a good understanding of the subject matter and all relevant laws and regulations applicable to your industry or sector. It is important to have an efficient process for drafting your document and ensure that you have considered all relevant factors when doing so. Additionally, using templates can be helpful as they provide guidance on how best to structure your document and what information needs to be included.

Q: What should I do if I’m uncertain about certain aspects of my Heads of Terms document?

Asked by Emma on August 9th 2022.
A: If you are uncertain about certain aspects when drafting your Heads of Terms document then it is important that you seek professional advice from a qualified lawyer who has expertise in contract law. This will ensure that all relevant information is included in your document and that it complies with applicable laws and regulations for your jurisdiction which will help ensure enforceability if required.

Q: Are there any standard templates available for drafting Heads of Terms documents?

Asked by Liam on September 18th 2022.
A: Yes, there are several standard templates available online which can be used as guidance when drafting a Heads of Terms document. These templates provide guidance on how best to structure your document and what information needs to be included in order for it to be legally binding and enforceable if required. It is important however to ensure that these templates are tailored appropriately for your particular situation as each contract is unique depending on its purpose and any other relevant factors such as industry or sector specific regulations that may apply.

Q: Are there any specific rules regarding dispute resolution procedures within a Heads of Terms document?

Asked by Olivia on October 28th 2022.
A: Yes, dispute resolution procedures often form part of a Heads of Terms document depending on its purpose or context. These procedures specify how disputes arising from the agreement should be handled including relevant timelines and deadlines as well as who will be responsible for resolving them (e.g., an independent mediator). It is important that these procedures comply with applicable laws and regulations as well as being tailored specifically for each agreement so they accurately reflect its purpose and context which will help ensure enforceability if required.

Q: Can I include clauses regarding confidentiality within my Heads of Terms document?

Asked by Aiden on November 14th 2022.
A: Yes, confidentiality clauses can often form part of a Heads of Terms document depending on its purpose or context (e.g., if sensitive information needs to be shared between parties). Confidentiality clauses specify what information can be shared with whom under what circumstances (e.g., only between authorised personnel) as well as outlining any restrictions around use or disclosure (e.g., no use or disclosure without prior written consent). It is important that these clauses comply with applicable laws and regulations as well as being tailored specifically for each agreement so they accurately reflect its purpose and context which will help ensure enforceability if required.

Example dispute

Suing Businesses for Breach of Heads of Terms

• A plaintiff may raise a lawsuit against a business for breach of heads of terms if they can prove that the defendant has breached the agreement in some way.
• Common examples of a breach of heads of terms include failure to provide goods or services as outlined in the agreement, not meeting the agreed-upon deadlines, or failing to meet the required quality standards.
• In order to win a lawsuit for breach of heads of terms, the plaintiff must prove that the defendant has breached the agreement, that the breach caused the plaintiff to suffer financial harm, and that the damage can be reasonably calculated.
• The plaintiff may be entitled to damages, compensation, or both, depending on the severity of the breach.
• In some cases, the plaintiff may also be able to seek an injunction to prevent the defendant from continuing to breach the agreement.
• It is important to ensure that the heads of terms are clear and explicit to avoid misunderstandings and disputes.

Templates available (free to use)

Asset Purchases Heads Of Terms
Convertible Loan Agreement Heads Of Terms
Freehold Property Sale Heads Of Terms
Heads Of Terms Agreement For Commercial Transactions Mou
Lease Assignment Heads Of Terms
Lease Grant Heads Of Terms
Non Uk Private Company Sale Heads Of Terms Pro Buyer
Private Equity Management Buyout Heads Of Terms
Share Purchases Heads Of Terms
Uk Public Takeover Heads Of Terms

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