Question

3. What is a term sheet?

4. Why is the term sheet important?

Answer 1

3. A term sheet is an important point document describing the important (material) terms and conditions of a business agreement. A legal counsel is guided in the preparation of the proposed "final agreement" when the term sheet has been "executed". It then guides, but is not necessarily binding, as the signatories negotiate, usually with legal counsel, the final terms of their agreement.
A term sheet also implies the conditions of a business transaction, as proposed by a party. It may be either binding or non-binding.
A term sheet is sometimes also known as a letter of intent, a memorandum of understanding (or MOU) or heads of terms.

4. A term sheet is important because:
1) Term sheet encourages the parties to focus on the material commercial issues in the transaction at during the early and middle stages.
2) A term sheet allows the parties to address any misunderstandings or problems.
3) A term sheet allow key legal principles to be settled, which in turn can be used as a framework for drafting the more complex, legally binding transactional documents./
4) A term sheet set out any binding elements/contracts which have been agreed between the parties

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