Non Binding Heads of Agreement Example

In the world of business, a non-binding heads of agreement (HOA) is a common document used to outline the terms and conditions of a proposed business deal. An HOA is essentially a preliminary agreement that serves as a roadmap for negotiations between parties.

In this article, we’ll take a look at a non-binding heads of agreement example and examine the key components that such a document should include.

Purpose of Non-Binding Heads of Agreement

Before diving into the example, it’s important to understand the purpose of a non-binding heads of agreement. As the name suggests, an HOA is “non-binding”, meaning that it does not legally obligate either party to complete a deal. Instead, it serves as a framework for negotiations and establishes a foundation for a possible future contract.

Non-binding heads of agreements are often used in business dealings that involve complex or high-value transactions, such as mergers and acquisitions, joint ventures, or significant procurement agreements.

Example of Non-Binding Heads of Agreement

Here’s an example of a typical non-binding heads of agreement:

Parties: This agreement is between [Party A] and [Party B], collectively referred to as “the Parties”.

Purpose: The purpose of this agreement is to outline the terms and conditions under which the Parties will engage in discussions/negotiations related to [purpose of the agreement].

Scope: The scope of this agreement includes [list of the specific items that the agreement covers, such as services, products, intellectual property, etc.].

Confidentiality: The Parties agree to keep all discussions and materials related to this agreement confidential and not to disclose them to any third party without the prior written consent of the other Party.

Term: This agreement will remain in effect until either Party terminates it by written notice.

Governing Law: This agreement will be governed by and construed in accordance with the laws of [specified jurisdiction].

Termination/Amendments: Either Party may terminate or amend this agreement by written notice to the other Party.

Non-Binding Nature: This agreement is not legally binding and does not create any legal obligations or rights between the Parties.

Signature: Both Parties must sign the agreement to indicate their acceptance of the terms and conditions.

Key Components of Non-Binding Heads of Agreement

The non-binding heads of agreement example above includes several key components that should be present in any HOA:

Parties: Clearly identifying the parties involved in the agreement is essential.

Purpose: The purpose of the agreement should be concise and specific.

Scope: The scope of the agreement should outline what is and isn’t covered.

Confidentiality: Confidentiality is critical to protect the interests of the parties.

Term: The agreement should have a defined term and should be terminable at will.

Governing Law: The agreement should specify the jurisdiction whose laws will govern it.

Termination/Amendments: The agreement should specify how and under what conditions it can be terminated or amended.

Non-Binding Nature: The agreement should clearly state that it is not legally binding.

Signature: Both parties must sign the agreement to give their acceptance and acknowledgment of the terms and conditions.

Conclusion

Non-binding heads of agreements are an essential tool in business negotiations, and they provide a framework for discussions without creating legal obligations. While there are no hard and fast rules for drafting an HOA, including the key components outlined above will help ensure that the agreement is comprehensive and covers all important aspects of the proposed transaction.