Outstanding Legal Documents in 3 Easy Steps
• 100% legally sound.. This document was created by an attorney.
• No Waiting. Answer a few questions and download your form instantly.
Where should we send your completed document?
“This is a great tool for freelancers, as well as business and law firms of all sizes.”
-David Perla, CEO, Pangea3
As Covered On:
Complete Description: This Term Sheet Template lets you create guidelines to eventually negotiate a longer, more complex and definitive contract, and explains the definitive contract, negotiations, the definitive contract is not required and the parties can choose not to do business with each other, costs and expenses, confidentiality, limitation of liability, and general boilerplate for a term sheet template.
SIGN UP FOR FREE EMAIL CONTRACT TIPS HERE!
TERM SHEET TEMPLATES DEMYSTIFIED
From time to time in your business you may find that you or your client feels the need to negotiate a term sheet template. Usually, this comes up because the other party who you want to do business with puts you in one of the following situations:
- Not Your Choice: The other side insists on a term sheet and sends you a draft.
- It’s a Complex World: Both sides realize that there are a slew of issues on the table, so it makes sense to buyild a rough framework that will focus everyone on the deal at hand and serve as an outline for the final, comprehensive contract. This is very common in mergers and acquisitions transactions.
- Can’t Nail Things Down: Despite numerous phone conversations you feel like the other side does not firmly grasp what they want out of the deal. As a result, you send them a term sheet template to crystallize the situation at hand.
Now that you’ve forced the negotiations forward with a term sheet, what are the key issues that the sheet facilitates for you?
THE DEFINITIVE CONTRACT – MIGHT NOT HAPPEN: First and foremost, you want to make clear that you or the other side might reach a deal, but you might now. You do this with language along the following lines (place it up front in the recitals or a “Background” section):
“The parties intend to negotiate in good faith regarding a contract (the “Definitive Contract”) under which the following might (or might not) occur.”
KEY ISSUES TO NEGOTIATE: Second, specify the exact issues you plan to negotiate. Generally, for goods and services transactions, you care about five issues for a sample term sheet:
- Buy/Sell Description. What is the exact description of what is being bought and sold? Too often people gloss over this issue and insert language like “To Be Decided” or a short sentence (e.g., “server customization services”) that gives you no idea what the locus of the deal might be. Ultimately, you want to prevent later arguments by setting everyone’s expectations properly up front through the contracting process. You can’t do this without a crystal clear description as to what you are providing. So be sure to do so here with an elaborate description of the goods or services so there is no room for argument later that any obligations were not fulfilled. One way to do this is to reference an Exhibit A to the Term Sheet Template containing sample provisions for the ultimate, definitive contract, and then insert a caption (e.g., “GOODS AND SERVICES DESCRIPTION.”) and leave the rest blank. This tactic sets the stage nicely for the parties to negotiate and conclude a complete description up front.
- Pay. Clarity as to the exact amount a party pays under the arrangement is essential. You want to spell out the currency, frequency, discounts, credits, minimums, refunds and anything else that affects the ultimate payment amount here.
- When. Be sure to negotiate the delivery timeline to ensure that no one feels like the goods or services are delayed.
- Assume. Sometimes the vendor needs the customer to fulfill certain duties so that the vendor can provide a good or service on time and on budget. To maximize the likelihood of a good relationship, be sure to spell those assumptions out right here.
- Trust. Always remember the whole purpose of the contracting exercise: to create a basis for trust so that both parties feel like each other embraces commitment to serving key needs, whether receiving what you paid for or obtaining payment successfully.
NONDISCLOSURE: Third, sometimes people insert confidentiality provisions into an agreement term sheet. Personally, I don’t like to do that. Too often that causes elaborate negotiations regarding confidentiality issues that you probably already settled. Chances are you already signed a confidentiality contract in the past with whoever you are negotiating with now. Even if you haven’t, negotiate the confidentiality agreement separately, because it serves your ends for a variety of future deals. Why? Because you can always use a drafting trick to pull in the key confidentiality provisions by reference. For example:
CONFIDENTIALITY. There is a separate signed confidentiality agreement between the parties, with the following title and effective date: [__________] (the “Confidentiality Agreement”). The provisions of the Confidentiality Agreement are incorporated by reference into this Agreement and apply to all disclosures of Confidential Information (as defined in the Confidentiality Agreement) under this Agreement. If there is any conflict or ambiguity between the Confidentiality Agreement and this Agreement, this Agreement governs and controls. This Agreement constitutes Confidential Information of both parties under the Confidentiality Agreement.
Hopefully that will cover all your needs going forward, and greatly expedite the negotiating process. The less you have to argue about, the better.
LIMITATION OF LIABILITY: Fourth and lastly, it’s a very good idea to include a limitation of liability clause to protect yourself from the other party. The main concern here is that for some reason, the negotiations break down, and your angered counterpart decides to sue you, taking the stance that you actually did agree to a deal when you did not. Usually, these cases involve the other party insisting that it relied on your representations that the deal closed, and then spent money as a result (either by buying raw materials or signing up clients that might rely on your service). A lawsuit for these damages then heads your way. To fend this off, you can include a provision that envisions potential damages and prohibits the other party from suing you for them. You can also include a hard cap limiting your exposure to a set amount. To learn about these issues in detail, read our limitation of liability posts here, here and here.
Why Wait? Score this terrific Term Sheet Template for a great price right now right HERE!
SIGN UP FOR FREE EMAIL CONTRACT TIPS HERE!