Reviewing heads of terms before a deal

Heads of terms record the commercial deal before the lawyers draft the contract, and are described as non-binding, but the price, the structure and the allocation of risk they set are the terms the parties will hold each other to in the negotiation that follows. Some clauses in them bind at once: exclusivity, confidentiality, costs and governing law. I review the heads of terms from whichever side instructs me and return them marked up with a written explanation of the changes, the terms that bind and the terms that will be hard to move later, for a fixed fee of £495 in three working days.

Who this is for

Business owners, buyers, investors and their advisers in England and Wales who have been sent heads of terms, a letter of intent or a term sheet for a business sale or purchase, an investment round, a joint venture, a supply or distribution arrangement, or a commercial property transaction, and want to know what they are agreeing to before signing. The parties are businesses or investors.

What to look for in heads of terms

Which terms bind, and the risk of being bound by conduct

The heads should state which clauses are legally binding, and confine them to exclusivity, confidentiality, costs, governing law and any break fee, with the commercial terms expressed to be subject to contract. The label is not the end of it: in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH [2010] UKSC 14 the Supreme Court held that parties who start performing while a document is still marked subject to contract can be found to have made a contract on its terms. The review checks that the heads say clearly what binds, and, where work or supply is to start before the contract is signed, recommends a separate short agreement for that rather than reliance on the heads.

Exclusivity, lock-out and break fees

A buyer or investor asks for a period during which the seller will not negotiate with anyone else. An agreement not to negotiate with others for a fixed period is enforceable; an agreement to negotiate in good faith is not, under English law, so the exclusivity clause has to be drafted as a lock-out with a defined period and defined obligations. The review checks the period against the due diligence timetable, the seller's right to end exclusivity if the buyer changes the price or terms, and any break fee or cost contribution, which should be payable only in defined circumstances and in an amount that reflects costs incurred.

The commercial terms that set the deal

Price, structure, what is included, payment timing, deferred consideration and earn-outs, warranties and indemnities in principle, restrictive covenants on the seller, the role of the founders after completion, and conditions such as financing, regulatory approval and third-party consents: each of those is agreed in the heads and re-opened at a cost in the negotiation. The review checks that each is stated with enough precision to be understood the same way by both sides, that the party instructing me has not conceded a point in the heads that it will want back later, and that anything left open is identified as open.

Confidentiality, announcements and staff

The confidentiality clause should bind at once, cover the existence of the negotiations as well as the information exchanged, restrict use to evaluating the deal, and survive if the deal falls through. The review checks that it meets the reasonable steps requirement of the Trade Secrets (Enforcement, etc.) Regulations 2018 for the disclosing party's trade secrets, that announcements need both parties' consent, and that a buyer or investor given access to staff and customers during due diligence is restricted from soliciting them if the deal does not complete.

Property, land and the formalities

Where the deal involves land, a lease or a licence to occupy, a contract for the sale or other disposition of an interest in land must be in writing incorporating all the terms and signed by both parties under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, so heads of terms for a property deal cannot bind the parties to the land transaction, but they set the rent, term, break rights and repairing obligations the lease will follow. The review checks the property terms with the same care as the commercial ones and flags where the party instructing me needs specialist property advice on the lease itself.

Costs, governing law and what happens if the deal fails

Each party bears its own costs unless the heads say otherwise, and a break fee or costs contribution should be mutual and capped. The review checks the governing law and jurisdiction clause, which binds at once, the timetable and the long-stop date after which either party may walk away, and the return or destruction of information if the deal fails. Where the heads involve a company sale, they should not commit the seller to anything that requires shareholder approval it has not obtained, and the Late Payment of Commercial Debts (Interest) Act 1998 applies to any sums that become payable under the binding clauses.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The heads say they are not legally binding. Why review them?

Because the price, structure and risk allocation in them are what you will be held to in the negotiation, and because some clauses bind at once. The review identifies what binds, what will be hard to move later, and what you should not concede at this stage.

The buyer wants three months' exclusivity. Is that reasonable?

That depends on the due diligence and financing timetable, and the review measures it against both. It asks for a right to end exclusivity if the buyer changes the price or terms, for the period to run from receipt of the information the buyer needs, and for no extension without your agreement.

Can the other side be made to negotiate in good faith?

Not under English law: an agreement to negotiate in good faith is unenforceable. What can be enforced is a lock-out for a fixed period, a confidentiality clause, a costs clause and a break fee in defined circumstances, and the review drafts the binding provisions in that form.

Related guidance and services

• Contract review, £495, the service this page describes
• Shareholders agreement, £995
• Reviewing a memorandum of understanding
• Reviewing a letter of intent

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.