Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Heads of terms definition

What does Heads of terms mean? Heads of terms set out the key commercial points the parties agree at the start of a deal to guide negotiation and drafting of the definitive contract. They are also called heads of agreement, memorandum of understanding (MOU), letter of intent, pre‑contract protocol or term sheet. Not defined by legislation, the expression is used across corporate, real estate and commercial contexts. Enforceability turns on intention, wording and conduct. In England & Wales, Northern Ireland and Ireland, heads of terms are typically non‑binding if marked subject to contract, but discrete provisions—such as confidentiality, exclusivity/lock‑out, allocation of costs, and governing law/jurisdiction—can be...

Commercial heads of terms (MoU, LOI, term sheet): binding effect, 'subject to contract', drafting, key clauses, superseding and case law guidance (England and Wales)

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Practice notes

heads of terms

This Practice Note explores heads of terms (frequently called a memorandum of understanding (MoU), letter of intent (LOI), comfort letter, pre-contract protocol, term sheet or heads of agreement) within commercial transactions. It examines what heads of terms are, how courts assess whether they are legally effective, the familiar label ‘subject to contract’, methods for creating binding provisions, the obligation to negotiate in good faith, and the clauses commonly included.

It also looks at which provisions are typically meant to be binding and offers drafting guidance on points to weigh and include. This Practice Note further explains how the final contract should supersede the heads of terms. For heads of terms for a commercial arrangement and drafting commentary, see Precedent: —commercial contracts.

We have created a collection that is a comprehensive, interactive tool for managing contracts across their key lifecycle phases: negotiation, creation, review, variation and termination. It sets out the principal considerations and the procedures for negotiating, reviewing, varying, assigning, novating or terminating those contracts.

Each phase or section contains practical guidance, sample clauses and Q&As relevant to that stage and context, with clear signposting for users throughout. To access the collection, click here: Contract lifecycle collection...

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Web page updated on 21/05/2026

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