Contract Glossary
Term Sheet
Definition
A non-binding document that outlines the key terms and conditions of a proposed deal before a definitive agreement is drafted. Term sheets are common in investment, lending, and business acquisition contexts — they establish the framework for negotiation without committing either party to the transaction.
In Practice
A venture capital firm wants to invest $2 million in your startup. Before anyone hires lawyers to draft a 40-page stock purchase agreement, the VC sends a term sheet: pre-money valuation of $8 million, $2 million for a 20% stake, one board seat, standard anti-dilution protection, and a 1x liquidation preference. You negotiate the board seat provision and anti-dilution terms, agree on the revised term sheet, then move to definitive documentation. The term sheet took two days; the final agreement takes two months.
Example Clause
This Term Sheet summarizes the principal terms of a proposed investment in [Company] (the 'Company') by [Investor]. This Term Sheet is for discussion purposes only and does not constitute a binding obligation of either party except for the provisions regarding Confidentiality and Exclusivity, which shall be binding upon execution.
Common in these contract types
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Frequently asked questions about term sheet
Most provisions in a term sheet are non-binding — they express intent to negotiate toward a deal. However, certain clauses are typically binding: confidentiality (protecting deal details), exclusivity or no-shop (preventing the other party from entertaining competing offers), and expense allocation. Always check which sections are labeled as binding.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.