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Heads of terms outline the key points of a future contract before the full agreement is drafted. Also called a memorandum of understanding in Hong Kong business circles, this preliminary document captures the main commercial terms that parties have agreed on during negotiations.

While not usually legally binding in Hong Kong (except for confidentiality and exclusivity clauses), Heads of terms help prevent misunderstandings and speed up the final contract process. They're particularly common in property transactions, joint ventures, and major commercial deals where parties need to secure basic agreement on price, timeline, and core obligations before involving lawyers in detailed documentation.

Use Heads of terms when starting complex business negotiations in Hong Kong, especially for high-value deals like property developments, company acquisitions, or joint ventures. They're particularly valuable when you need to lock down essential deal points early, before spending time and money on detailed legal documentation.

These documents prove especially useful in cross-border transactions with mainland Chinese partners, where getting clear agreement on key commercial terms helps avoid costly misunderstandings later. They also help keep negotiations on track during lengthy due diligence periods and can serve as useful reference points if disputes arise about what was originally agreed.

• Basic Term Sheet: Outlines essential deal terms like price, payment, and timelines - commonly used in straightforward commercial transactions
• Detailed MOU: Includes comprehensive provisions, confidentiality clauses, and exclusivity periods - typical for complex joint ventures
• Property-Specific Heads: Features specialized terms for real estate deals, including development conditions and land use requirements
• Investment Term Sheet: Focuses on shareholding structures, voting rights, and exit mechanisms - used in venture capital deals
• Framework Agreement: Acts as a master document outlining multi-phase project terms, common in infrastructure developments

• Business Executives: Lead initial negotiations and set key commercial terms, often signing the Heads of terms on behalf of their companies
• Corporate Lawyers: Review and refine terms, ensure legal compliance, and later transform the heads into detailed agreements
• Investment Bankers: Often draft initial term sheets for M&A deals and help structure financial aspects
• Property Developers: Use them to outline development projects and secure preliminary agreements with contractors or investors
• Company Directors: Review and approve terms before signing, especially for significant transactions requiring board approval

• Core Deal Terms: Gather essential commercial points like price, payment terms, and timeline before starting
• Party Details: Collect accurate company names, registration numbers, and authorized signatories
• Deal Structure: Clarify the transaction type and any conditions precedent
• Confidentiality Needs: Determine which terms require strict confidentiality provisions
• Internal Approvals: Check required board or shareholder approvals before drafting
• Documentation Plan: Map out which terms need detailed development in final agreements
• Legal Framework: Use our platform to generate a compliant document that includes all required elements

• Party Identification: Full legal names, addresses, and registration numbers of all parties involved
• Transaction Overview: Clear description of the proposed deal structure and key commercial terms
• Binding Terms: Explicit statement of which provisions are legally binding (typically confidentiality and exclusivity)
• Timeline: Key dates, including negotiation periods and anticipated completion dates
• Commercial Terms: Price, payment terms, and any conditions precedent
• Confidentiality: Scope of information sharing and protection measures
• Governing Law: Explicit choice of Hong Kong law and jurisdiction
• Signature Block: Proper execution sections for authorized representatives

Heads of terms are often confused with Terms and Conditions, but they serve distinctly different purposes in Hong Kong's legal landscape. While both documents outline agreements, their scope, timing, and legal effect vary significantly.

• Legal Enforceability: Heads of terms are mostly non-binding preliminary agreements, except for specific clauses like confidentiality. Terms and Conditions are fully binding contracts meant to govern ongoing relationships.
• Timing and Purpose: Heads of terms come early in negotiations to outline key points for a future detailed agreement. Terms and Conditions are final, comprehensive documents that govern immediate business relationships.
• Detail Level: Heads of terms capture main commercial points briefly. Terms and Conditions provide exhaustive coverage of rights, obligations, and legal protections.
• Application: Heads of terms are used for specific, large transactions. Terms and Conditions typically govern standard business operations and customer relationships.