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A term sheet is a written document the parties exchange containing the important terms and conditions of the deal. The document summarizes the main points of the deal agreements and sorts out the differences before actually executing the legal agreements and starting off with the time-consuming due diligence.
Even though a term sheet is non-binding, it outlines the basic conditions of the potential purchase agreement as to things such as valuation, purchase price, closing conditions, closing timeframe, restrictive covenants, and things to be determined in the future, post-closing.
A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents.
After agreement on the terms has been reached and formalized in a signed term sheet, legal documents (commonly called ?long-form docs? or ?final docs?) are prepared, reviewed, and executed to finalize the investment.
Term sheets and contracts are often confused with each other, but they are two different phenomena. It's important to know the key difference between term sheets and contracts: A contract legally binds both parties, while a term sheet does not necessarily bind either party.
A term sheet is a document which sets out certain terms of a transaction agreed in principle between parties, and is typically negotiated and signed at the beginning of a transaction. Term sheets evidence serious intent, but generally are not legally binding.