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Heads of terms is a preliminary agreement that outlines the key points of a future contract before the full legal document is drafted. In Saudi business practice, it helps parties capture their main commitments and expectations while allowing flexibility for detailed negotiations under Shariah principles.

While not legally binding in most cases under Saudi law, these documents speed up deal-making by getting early alignment on crucial terms like price, timeline, and basic obligations. They're especially common in real estate transactions, joint ventures, and major commercial deals across the Kingdom, where they're sometimes called memoranda of understanding or term sheets.

Use Heads of terms when starting complex business negotiations in Saudi Arabia, especially for high-value deals like property developments, corporate mergers, or joint ventures. It's particularly valuable when dealing with international partners who need clear documentation of preliminary agreements while adhering to local Shariah principles.

This document becomes essential during lengthy negotiations where multiple stakeholders are involved, or when you need to secure initial commitment before investing significant time and resources. It helps prevent misunderstandings early, creates a clear negotiation framework, and gives both parties a structured path toward the final contract while maintaining compliance with Saudi commercial law.

• Brief Heads of terms: Simple outlines capturing just core deal points, commonly used in Saudi real estate transactions and straightforward commercial agreements
• Comprehensive Heads of terms: Detailed preliminary agreements with extensive clauses covering contingencies, timelines, and Shariah compliance requirements
• Binding Heads of terms: Contains specific legally enforceable provisions while keeping other sections non-binding, often used in complex joint ventures
• Industry-specific formats: Tailored versions for construction projects, technology transfers, or investment agreements that reflect sector-specific requirements under Saudi commercial law

• Business Executives: CEOs and senior management who initiate and approve the key commercial terms, especially in joint ventures and major transactions
• Legal Counsel: Both in-house and external lawyers who draft and review Heads of terms to ensure Shariah compliance and protect their clients' interests
• Investment Firms: Saudi and international investors who use these documents to outline initial agreement terms before detailed due diligence
• Real Estate Developers: Property companies and contractors who document preliminary agreements for large-scale development projects
• Government Entities: Public sector organizations engaging in commercial partnerships with private companies under Saudi regulatory frameworks

• Basic Deal Information: Gather essential details about parties involved, transaction value, and intended timeline
• Key Commercial Terms: List main business points, payment structures, and delivery milestones aligned with Saudi commercial practices
• Shariah Compliance: Ensure all proposed terms align with Islamic finance principles and local regulations
• Confidentiality Needs: Determine which aspects require non-disclosure provisions under Saudi law
• Signing Authority: Confirm proper authorization levels for each party according to their corporate governance rules
• Document Generation: Use our platform to create a legally-sound Heads of terms that incorporates all required elements automatically

• Party Details: Full legal names, addresses, and registration numbers of all involved entities under Saudi law
• Transaction Scope: Clear description of the proposed deal structure and key commercial terms
• Binding Elements: Explicit statement of which provisions are legally binding versus non-binding
• Shariah Compliance: Declaration of adherence to Islamic principles and relevant Saudi regulations
• Confidentiality Terms: Specific provisions protecting sensitive business information
• Duration: Clear timeline for negotiation period and validity of the terms
• Governing Law: Explicit reference to Saudi law and jurisdiction for dispute resolution
• Signature Block: Proper format for authorized signatories with official company stamps

Heads of terms often gets confused with Terms and Conditions in Saudi business practice, but they serve distinctly different purposes. While both documents outline agreements, their scope, timing, and legal effect vary significantly.

• Legal Enforceability: Heads of terms are typically non-binding preliminary agreements, while Terms and Conditions create immediate, binding obligations under Saudi law
• Timing of Use: Heads of terms come early in negotiations to frame future discussions, whereas Terms and Conditions govern ongoing business relationships
• Level of Detail: Heads of terms capture broad deal points and key commercial terms, while Terms and Conditions provide comprehensive rules and obligations
• Purpose: Heads of terms facilitate complex deal negotiations, while Terms and Conditions standardize routine business interactions and service delivery
• Flexibility: Heads of terms allow for negotiation and adaptation, while Terms and Conditions are typically fixed, standard documents