Term Sheet vs. Letter of Intent

In the realm of legal agreements, it’s crucial to discern between various documents that may appear similar but serve distinct purposes. Two such documents often encountered in business transactions are the Term Sheet and the Letter of Intent (LOI). Let’s delve into the disparities between these crucial instruments.

Defining the Term Sheet

A Term Sheet is a concise document outlining the key terms and conditions of a proposed business agreement or transaction. It serves as a preliminary agreement, providing a framework for negotiations between parties involved. The contents of a Term Sheet typically include:

  1. Key Elements: Essential aspects of the deal such as price, payment terms, and timeline.
  2. Conditions: Any prerequisites or contingencies necessary for the agreement’s execution.
  3. Confidentiality: Provisions safeguarding sensitive information shared during negotiations.
  4. Exclusivity: Terms outlining whether parties are bound exclusively to each other during negotiations.

Exploring the Letter of Intent

On the other hand, a Letter of Intent (LOI) serves as a formal declaration of an intention to proceed with a transaction or agreement. While not legally binding in itself, an LOI outlines the basic terms and conditions under which parties agree to negotiate. Key components of an LOI include:

  1. Intent Declaration: Clearly stating the parties’ intention to enter into a formal agreement.
  2. Terms and Conditions: Basic terms of the proposed deal, akin to those in a Term Sheet.
  3. Due Diligence: Provision for conducting further investigation and due diligence before finalizing the agreement.
  4. Exclusivity Period: Agreement on a timeframe within which negotiations will be exclusive to the parties involved.

Distinguishing Factors

While both documents outline terms and conditions, they differ in their legal implications and degree of commitment:

  • Legal Enforceability: Term Sheets are typically non-binding, whereas certain sections of an LOI may carry legal weight.
  • Detail Level: Term Sheets tend to be more detailed, while LOIs provide a broader overview.
  • Purpose: Term Sheets primarily serve as a negotiation roadmap, while LOIs signify a firmer commitment to proceed with a transaction.

Contact Falcon Law PC for Expert Guidance

Navigating the complexities of business agreements demands adept legal counsel. Falcon Law PC offers comprehensive legal services tailored to your business needs. Contact us at 1-877-892-7778 or via email at info@falconlawyers.ca for expert guidance on crafting and negotiating agreements effectively.

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