What to Include in a Heads of Agreement

A heads of agreement (HOA) is a non-binding document that outlines the key terms and conditions of a proposed transaction between two parties before a formal contract is drafted. HOAs are typically used in business transactions and are important in laying out the groundwork for negotiations.

When drafting an HOA, it is essential to include key elements that will provide clarity to the parties involved. Here are some important things to consider including in a heads of agreement:

1. Identifying the parties: The HOA should clearly outline the parties involved in the agreement, including their names, addresses, and contact information.

2. Purpose and objective of the agreement: The purpose of the HOA should be clearly stated, explaining what the agreement is meant to achieve, and the objectives of each party.

3. Scope of the agreement: The HOA should define the scope of the agreement, including the transactions or activities to which the agreement applies.

4. Terms and conditions: The terms and conditions should be outlined, including what each party will contribute, any timelines involved, any deadlines, and the consequences of non-compliance.

5. Confidentiality and intellectual property: The HOA should include clauses on confidentiality and intellectual property rights to ensure that the parties’ confidential information is protected.

6. Dispute resolution: Dispute resolution procedures should be clearly outlined in the HOA in case there is a dispute between the parties.

7. Termination: The HOA should also specify the circumstances under which the agreement can be terminated and its implications.

In summary, creating a heads of agreement is crucial to the success of a transaction between two parties. It should be carefully written, and the key elements outlined above should be included to provide clarity and direction for both parties involved. By ensuring that all parties agree to the terms and conditions set out in the HOA, the formal contract drafting process can be made much smoother.