A head of agreement, also known as a memorandum of understanding (MOU), is a non-binding document that outlines the key terms and conditions of a proposed agreement between two or more parties. It serves as a preliminary agreement that sets the stage for more detailed negotiations and can be a useful tool in complex business transactions.
Here is an example of a head of agreement:
PARTIES: This head of agreement is between XYZ Company (hereafter referred to as “Seller”) and ABC Corporation (hereafter referred to as “Buyer”).
PURPOSE: The parties have entered into this head of agreement to set out the key terms and conditions of a potential sale of Seller`s business to Buyer.
TERMS AND CONDITIONS:
1. Purchase price: The purchase price for Seller`s business shall be $10 million.
2. Payment terms: The purchase price shall be paid in full upon closing of the transaction.
3. Closing date: The closing date for the transaction shall be December 31, 2021.
4. Due diligence: Buyer shall have 30 days to conduct due diligence on Seller`s business.
5. Representations and warranties: Seller shall provide representations and warranties regarding the condition and operation of its business.
6. Confidentiality: The parties shall keep all information related to this transaction confidential.
7. Non-binding: This head of agreement is non-binding and does not create any legal obligations.
A head of agreement serves as a useful tool in complex business transactions, as it can help parties establish key terms and conditions before entering into more detailed negotiations. However, it is important to note that a head of agreement is non-binding and does not create any legal obligations. If you are considering entering into a head of agreement, it is important to consult with a legal professional to ensure that the document meets your specific needs.