Why heads of agreement matter to a first-time founder
Writing down the broad deal exposes disagreements before lawyers draft detailed documents or teams spend heavily on due diligence. It can create momentum and a shared timetable. Poor wording, however, may accidentally create binding obligations or leave founders relying on terms that were never legally enforceable.
Examples of heads of agreement
A buyer and founder record a proposed ₹200 million share purchase, a 30-day exclusivity period and completion subject to due diligence. The price is marked non-binding, while confidentiality and exclusivity are expressly binding. Both sides take legal advice before signing and before sharing sensitive customer data.
Common misunderstanding
The document is not automatically non-binding because it is preliminary. Courts examine its wording, context and governing law, and particular clauses may bind even when the main transaction does not. It is also not a substitute for the final agreement, warranties, approvals or required regulatory filings.
When to use it
Use it after the main commercial points are understood but before expensive drafting, especially for investment, acquisition, joint venture or major supply negotiations. State which provisions are binding, identify conditions and set an expiry date. Obtain legal advice rather than copying a template from another jurisdiction.