Jurisdiction(s):
United Kingdom

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...

Preliminary EHS issues in private M&A: heads of terms, data room, and allocating environmental liabilities in asset versus share purchases

Published by a LexisNexis Environment expert

Practice notes

Heads of Terms

A business purchase (the Target business) typically starts with settling the key commercial points—price, structure of the deal, Due diligence steps, exclusivity provisions and timetable. These points are commonly negotiated by the parties themselves, or alongside their accountants and other professional advisers, and then set out in heads of terms, sometimes called a ‘letter of intent’ or ‘memorandum of understanding’. See Practice Note: Heads of terms—share and asset purchases.

Where environmental risks are known or suspected, the heads of terms might cover:

providing the buyer with any existing environmental report(s)
a requirement for a reliance agreement or collateral warranty, giving the buyer the benefit of those report(s)
a process allowing the buyer to undertake a phase 1 environmental audit or phase 2 ground investigations
headline terms for an environmental indemnity or environmental insurance

What happens during the preliminary phase?...

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Web page updated on 21/05/2026

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