TERM SHEET GUIDE

By Karann Damani, Advocate

Several entrepreneurs find it difficult to understand legal documents. One such document is the ‘term sheet’. It is not mandatory for the parties to execute a term sheet for any transaction, it is only recommended in a high stake scenario, along with a non-disclosure agreement.  In this post we attempt to explain some standard terms and what parties must bear in mind while negotiating the same.

Term Sheet – Whether binding or not?

A term sheet is usually a non-binding document that provides the basic details of a proposed transaction including inter-se rights between the parties. Typically, aside two or three clauses like those relating to exclusivity, confidentiality and governing law – the other provisions in the term sheet do not constitute a binding contract. To be sure, many of these clauses would be elaborated in the definitive documents only and so the term sheet may contain just the skeleton understanding.