A head of terms agreement, also known as a letter of intent or memorandum of understanding, is a preliminary document outlining the key terms and conditions of a transaction or partnership. This document serves as a framework for negotiations and helps both parties to understand each other’s expectations before entering into a binding agreement.
A head of terms agreement typically includes the following information:
1. Parties involved: The names of the parties involved in the transaction or partnership, along with their contact information.
2. Objectives: The overall objectives of the agreement and what each party hopes to achieve.
3. Terms and conditions: The specific terms and conditions of the agreement, such as payment terms, delivery schedules, and intellectual property rights.
4. Confidentiality and non-disclosure: Terms relating to the confidentiality and non-disclosure of the agreement and any related information.
5. Exclusivity: Whether or not the parties agree to an exclusivity clause, which would prevent them from entering into similar agreements with other parties.
6. Termination: The circumstances under which the agreement can be terminated and the notice required.
7. Governing law: The law that governs the agreement and any disputes that may arise.
8. Signatures: The signatures of both parties, indicating their agreement to the terms outlined in the document.
Here is a sample of a head of terms agreement:
[Letterhead of the Company Initiating the Agreement]
[Date]
[Name and Address of the Other Party]
Dear [Other Party],
We are pleased to present this letter of intent outlining the proposed terms of our partnership.
Purpose
The purpose of this agreement is to establish a partnership between [Company A] and [Company B] for the development and distribution of a new product.
Key Terms
The key terms of this agreement are as follows:
1. [Company A] will develop the product and provide all necessary intellectual property.
2. [Company B] will be responsible for the distribution and marketing of the product.
3. The parties will split profits on a 50/50 basis.
4. The agreement will be exclusive for a period of 2 years.
5. Either party may terminate the agreement upon 30 days written notice.
Confidentiality
The parties agree to maintain the confidentiality of all information related to this agreement and will not disclose any information to third parties without the prior written consent of the other party.
Governing Law
This agreement will be governed by and construed in accordance with the laws of the state of [insert state].
Signatures
By signing this letter of intent, both parties agree to the terms outlined above.
[Signature of Company A]
[Name and Title of Signer]
[Signature of Company B]
[Name and Title of Signer]
Conclusion
A head of terms agreement serves as an essential tool for parties to understand each other’s expectations in a transaction or partnership. This document provides a framework for negotiations and helps to ensure that both parties are on the same page before entering into a binding agreement. By using the sample provided above as a guide, parties can create an effective and comprehensive head of terms agreement.