What is a Term Sheet?

It is used by parties negotiating a transaction who want the terms recorded before work starts or money changes hands, rather than reconstructed from memory afterwards. Putting it in writing is what turns an understanding into something either side can rely on.

The form collects 18 details across 6 areas: parties and contact details, scope and deliverables, payment and financial terms, dates, timing and duration, confidentiality and intellectual property, and legal protections and risk. The entries describing the proposed deal do the most work, because every later clause about price, timing and completion refers back to them.

The recurring failure in this kind of arrangement is a heads of terms that turned out to bind more than anyone meant. Business agreements tend to fail at the edges — deadlock between owners, automatic renewals nobody diarised, and liability caps that turn out to sit above the value of the contract.

The preview updates live as you complete each field, so you can review the exact language before downloading it as PDF or Word. Treat the result as a well-organised first draft: sound in structure, but worth an attorney's review where the sums involved are significant or the situation is unusual.

What matters most in a term sheet

Exclusivity has real value

A no-shop period stops the other side negotiating elsewhere while due diligence runs. Set its length.

Set a longstop date

Give the outline an expiry, so a stale document does not resurface months later as evidence of what was agreed.

State clearly what binds and what does not

This is the critical clause. Commercial terms are usually non-binding, while confidentiality, exclusivity and costs provisions are intended to bind.

When you need a term sheet

  • When the arrangement will repeat: For a relationship that runs across several jobs or periods, agree the standing terms once and let each instance sit under them rather than renegotiating from scratch.
  • When replacing an earlier arrangement: Issue a fresh term sheet when the original terms no longer reflect what the parties actually do. Amending informally leaves two inconsistent records of one relationship.
  • When someone else is paying: Where a third party funds or guarantees the arrangement, they should be named and their obligations spelled out. A guarantee that is only implied is not a guarantee.
  • When either side may need an exit: Agree how the arrangement ends while both parties are still on good terms. Exit clauses negotiated during a dispute rarely favour anyone.
  • When which clauses survive if the deal never completes has value: Where something is still owed after signature of the definitive agreement, that obligation needs its own words. Anything expected to survive the end of the agreement has to say so.
  • When risk needs allocating: Decide who carries which risk and who insures it before an incident rather than after one. Afterwards, both readings of the silence are self-serving.

What to include in a term sheet

This generator collects 18 details. Here is what each group covers and why it matters when the document is relied on.

Parties and contact details

Everything else in the document hangs off these names: each party carries the obligations, the party funding it carries the payment, and both need identifying precisely enough to be found later.

Company Name
The company's registered legal name, including its corporate suffix such as LLC, Inc or Ltd.
Company Address
The company's registered office or principal place of business.
Counterparty Name
The full legal name of the other party entering into this agreement.
Counterparty Address
The counterparty's address for formal notices.

Scope and deliverables

This is the section that decides arguments. Describe the proposed deal in agreed headings of terms and against the marker separating binding terms from intentions, so that whether it has been delivered is a question of fact rather than opinion.

Purpose of Agreement
Why the parties are entering into the agreement. This helps a court interpret ambiguous clauses in line with the parties' actual intent.
Products or Services
The goods or services supplied, identified by specification, model or catalogue reference.
Performance Standards
The measurable standard the work must meet — response times, quality levels or service metrics.

Payment and financial terms

Payment terms are relied on more often than any other clause and left vague more often than any other clause. State the amount, the trigger, the deadline and what follows a late payment.

Commercial Terms
The core business terms — volumes, discounts, rebates, minimum commitments and review points.
Pricing
The unit prices or rate card, plus how and when prices may be revised.
Payment Terms
The invoicing cycle, payment window, accepted methods and consequences of non-payment.
Limitation of Liability
The cap on each party's financial exposure. Note that liability for fraud, death or personal injury generally cannot be excluded.

Dates, timing and duration

These dates decide when obligations start, when they end, and when someone is in breach. Signature of the definitive agreement in particular should have a date and a test attached to it.

Effective Date
The date the agreement takes effect. This can differ from the signature date, and it is the date obligations start running from.
Delivery Timeline
Lead times and delivery windows, plus what counts as a late delivery and the remedy for it.

Confidentiality and intellectual property

Signed before disclosure, these clauses work. Signed afterwards, they are an attempt to claw back information that has already gone.

Confidentiality Obligations
The duty to keep information private, who it may be shared with internally, and the standard of care required.
Intellectual Property Rights
Who owns the IP created under the agreement, and what licence the other party receives.

Legal protections and risk

Decide who carries which risk and who insures it before an incident, not after. Afterwards, both readings of the silence are self-serving.

Warranties
The promises each party makes about quality, title and authority, and how long they last.
Termination Rights
The circumstances in which each party may end the agreement, distinguishing termination for convenience from termination for breach.
Governing Law
The legal system that applies and the courts that will hear any dispute.

Completing this term sheet

Recording where this applies

If the parties are in different states, name which state's law applies and where any dispute would be heard. Adding one line now avoids a preliminary argument later.

Filling in every blank

Unfilled placeholders are read against whoever produced the document. If a field genuinely does not apply, write "not applicable" rather than leaving a gap.

Getting the numbers right

Write key figures out in full where the amount is central, and state the currency if either party is outside the country. Both are cheap precautions against an expensive misunderstanding on a term sheet.

Planning around a heads of terms that turned out to bind more than anyone meant

Since this is the common failure in this kind of arrangement, decide now who absorbs it. A clause of two sentences here is worth more than a page of general good intentions.

Checking the consents

Where a landlord, lender, insurer or licensing body has to approve the arrangement, obtain that approval before signature of the definitive agreement rather than assuming it will follow as a formality.

Common mistakes to avoid

  1. Leaving out the governing law. Where each party and the party funding it are in different places, naming the law and the forum in advance avoids a preliminary fight about where the dispute is even heard.
  2. Signing before the marker separating binding terms from intentions is settled. The agreement leans on the marker separating binding terms from intentions, so that needs to be confirmed and attached at signature rather than promised for later. A contract pointing at something nobody has produced yet is an agreement to agree.
  3. Mixing up the parties' legal names. Use registered legal names rather than trading names. If the named party does not exist as a legal entity, there may be nobody to enforce against.
  4. Pricing without a unit. Quote against a defined number of agreed headings of terms. Where the price is a single figure covering an undefined quantity, every additional request looks free to the party funding it and unpaid to each party.
  5. Deposits with no agreed status. Say whether a deposit is refundable, what it secures, and what happens to it if the arrangement ends early. Deposit disputes are among the most common of all.

How to use this term sheet generator

  1. Fill in the form. Complete the 18 fields above. Each party and the party funding it both need naming in full, and the proposed deal should be described in enough detail that a stranger could tell whether it had been delivered. Nothing is sent to a server — the document is assembled in your browser.
  2. Read the preview. Read the preview as though you were the party funding it rather than each party. Anything ambiguous is easier to fix now than to argue about after signature of the definitive agreement.
  3. Download and sign. Export as PDF to sign, or as Word to keep working on it. Store the signed version somewhere both each party and the party funding it can find it, along with the marker separating binding terms from intentions.

Term Sheet — frequently asked questions

Is a letter of intent legally binding?

Usually only in part, and it must say which part. The commercial terms are typically expressed as non-binding pending a definitive agreement, while confidentiality, exclusivity, governing law and costs clauses are stated to be binding. Without that express carve-out the position is genuinely uncertain — courts have found binding contracts in documents the parties assumed were merely indicative.

What records should I keep alongside the term sheet?

The marker separating binding terms from intentions, the signed document itself, and a contemporaneous note of anything agreed afterwards. Most disputes turn on what was agreed at the time, and the party who can produce a dated record is the party who wins that argument.

Can a term sheet be changed after signing?

Only by agreement, and the change should be recorded in writing and signed by both sides. Once amendments start being made by phone or in passing, the written document stops describing the arrangement, which defeats the purpose of having one.

Which state's law should govern this term sheet?

Choose a state with a genuine connection to the parties or the subject matter — where a party is based, or where the work or property is located. A choice with no connection at all may not be respected, and for property or employment the local state's rules will often apply regardless of what the contract says.

Who owns the work produced under this agreement?

Whoever the agreement says owns it — and if it says nothing, the creator generally does. Paying for work does not transfer copyright by itself. If ownership is meant to pass to the client, the assignment clause needs to say so expressly, and it is common to make the transfer conditional on payment in full.

How long do the confidentiality obligations last?

Ordinary commercial information is usually protected for a fixed period of two to five years after the agreement ends, while genuine trade secrets are often protected for as long as they stay secret. Whichever you choose, state expressly that the confidentiality clause survives termination — otherwise the protection ends with the contract.

Can liability be limited to any amount?

Within limits. Parties can cap ordinary commercial liability, and a cap set against contract value or insurance cover is normal. But liability for fraud, death and personal injury generally cannot be excluded, and a cap so low it makes the obligations meaningless may be struck down as unreasonable.

Are electronic signatures valid for commercial agreements?

Yes. Under the US ESIGN Act and equivalent legislation elsewhere, electronic signatures carry the same legal weight as ink for the vast majority of business contracts. Keep the audit trail showing who signed and when.