Are heads of terms legally binding?
Usually not, if they say so clearly — but clauses such as exclusivity, confidentiality and costs are normally intended to be binding and should be marked as such.
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Heads of terms (England and Wales)
Heads of terms — also called a term sheet or letter of intent — summarise the main points of a deal agreed in principle before the formal contracts are drafted. They are normally not legally binding, except for specific clauses such as exclusivity, confidentiality and costs, which should be clearly marked as binding.
When you need one
Use them at the start of a significant transaction — a business or property purchase, investment, joint venture or major supply deal — to record the key terms and set the timetable before lawyers draft the full documents.
What it should contain
Status
A clear statement that the heads are not binding, apart from named clauses.
The deal
The transaction, the parties and the structure.
Key terms
Price, payment, timetable and conditions.
Exclusivity
A binding period in which the seller will not negotiate with others.
Confidentiality and costs
Binding clauses on secrecy and who pays.
Longstop date
When the heads lapse if no deal is signed.
Points specific to England and Wales
- Whether heads of terms are binding depends on the intention shown by their wording and the parties' conduct. Stating that they are "subject to contract" and not legally binding, apart from specified clauses, is the usual way to avoid an unintended contract.
Different rules can apply elsewhere in the UK: see the Scotland version of this guide.
Common mistakes
- Failing to say clearly which parts are binding, so a court treats the whole document as a contract — or none of it.
- Agreeing exclusivity with no end date.
- Assuming non-binding heads cannot create any obligations.
See a specimen heads of terms — a short illustration of the structure and key clauses, laid out as the app produces them.
Quick answers
What is the difference between heads of terms and a contract?
Heads of terms record the main points agreed in principle. The contract is the full, binding document that follows.
Draft your heads of terms now
Be Contract Wise's powerful, carefully prepared drafting tools turn a short set of plain-English questions into a heads of terms under the law of England and Wales, 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 the law of England and Wales, not legal advice.