A term sheet is a pre-contractual document that outlines the main terms and conditions of an agreement between parties in relation to a proposed transaction (e.g. the sale of an asset). This is a general term sheet which is broad enough to cater for many situations. For a term sheet specifically for a sale of business, please refer to Term Sheet / Heads of Agreement – Sale of Business.
A term sheet generally serves the same purpose as a heads of agreement, memorandum of understanding or letter of intent, although the form of the document may differ.
A term sheet may be binding or non-binding on the parties. If it is binding, and only subject to the preparation of legal documentation, then the term sheet must be detailed and outline all the clauses to be included in legal documentation to be subsequently prepared by the parties (or their legal representatives). If it is non-binding, then there may be in principle agreement by the parties of a proposal, setting out the terms proposed by one of the parties in relation to the proposed transaction.
After the parties have executed a term sheet, a legally binding contract should be negotiated, prepared and executed by the parties, which should contain detailed provisions and govern all aspects of the proposed transaction (e.g. “Asset Sale Agreement”).
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You will need the following information to generate your document:
- Name of both parties
- Address of both parties
LegalVision’s LVDox™ Free Term Sheet/ Heads of Agreement sets out:
- the terms of the relationship;
- the rights, responsibilities and obligations of the service provider and principal; and
- business processes such as payment, fees and invoicing.
If your service agreement relationship is more complex, then it’s important that you have a lawyer assist you draft the following clauses:
- an unpaid invoices collection clause;
- a confidentiality clause;
- the ability for the service provider to be paid on commission;
- a subcontracting clause allowing the principal to restrict the ability of the service provider to subcontract the services;
- a sophisticated dispute resolution clause;
- a sophisticated workplace health and safety clause;
- a non-compete clause;
- a provision to protect your intellectual property and to allow the service provider to use it, if required; and
- additional provisions in related to the rights, responsibilities and obligations of the service provider and principal, particularly if agreement has been reached on particular issues.