Parties negotiating business transactions often find it useful to memorialize key provisions they have agreed upon in a term sheet. Sometimes the parties will sign at the bottom. When doing so, they may have very different expectations about whether their term sheet is enforceable, particularly where the parties contemplate a later written agreement that is not ultimately executed. An agreed term sheet may lead to an unwelcome surprise for a party that thinks nothing is binding until a full-blown contract is signed.
The ubiquity of term sheets as a tool in the deal process raises important questions regarding whether and when term sheets are binding, particularly where it is unclear if the parties intended to bind themselves.
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