Also known as:

A document that sets out the terms of a transaction in principle between parties. Term sheets evidence serious intent and have moral force but are not typically legally binding. However, the parties may choose that provisions relating to, for example, confidentiality, costs and exclusivity be binding on the parties.

Term sheets are commonly entered into at the beginning of a transaction, once preliminary terms have been agreed, but before commencement of detailed due diligence and the drafting of binding agreements (which is where the parties will begin to incur significant costs). The parties may enter into a series of term sheets throughout the negotiations, particularly when negotiations are prolonged.

Term sheets are used in a variety of loan finance and other transactions, including:

In a finance transaction, the term sheet is usually attached to a mandate or commitment letter.

For more information on term sheets, see Practice note, Heads of agreement.