Are heads of terms legally binding in Scotland?
Usually not, provided they state this clearly. Clauses covering exclusivity, confidentiality and costs, however, are normally meant to bind the parties and should be marked accordingly.
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Heads of terms (Scotland)
Heads of terms (sometimes called a term sheet or a letter of intent) set out the principal points of a deal that has been agreed in principle, ahead of the drafting of the formal contracts. As a rule they are not legally binding, apart from particular clauses, for example those on exclusivity, confidentiality and costs, which ought to be expressly marked as binding.
When you need one
They are used at the outset of a significant transaction, such as buying a business or property, an investment, a joint venture or a large supply deal, to note the key terms and fix a timetable before the lawyers prepare the full documentation.
What it should contain
Status
An express statement that the heads do not bind the parties, except for the clauses named.
The deal
The parties, the transaction and how it is structured.
Key terms
The price, payment, timetable and any conditions.
Exclusivity
A binding period during which the seller agrees not to negotiate with anyone else.
Confidentiality and costs
Binding clauses on secrecy and who pays.
Longstop date
When the heads expire absent a signed deal.
Points specific to Scotland
- In Scots law a contract can be concluded once the essential terms are agreed, so heads of terms should state expressly that they are not binding except for the named clauses. For property, a binding contract is normally formed by concluded missives.
Different rules can apply elsewhere in the UK: see the England and Wales version of this guide.
Common mistakes
- Not making it clear which parts are binding, with the result that a court treats either the entire document as a contract or none of it.
- Agreeing exclusivity with no end date.
- Assuming non-binding heads can never give rise to any obligation.
View specimen heads of terms, a brief illustration of their structure and key clauses as the app sets them out.
Quick answers
What is the difference between heads of terms and a contract in Scotland?
Heads of terms set down the principal points the parties agree in principle; the contract is the complete, binding document that comes afterwards.
Draft your heads of terms now
Be Contract Wise (Scotland)'s powerful, carefully prepared drafting tools turn a short set of plain-English questions into a heads of terms under Scots law, laid out to a professional standard, with an explanation of every clause. Simple or complex, export to Word or PDF.
Start drafting — freeBrowse all guidesReviewed 2026-09-24. General legal information about Scots law, not legal advice.