Heads of Terms and Letters of Intent

Written by Richard O'Shea, Solicitor TEP · Mary Molloy Solicitors, established 1981 · Last reviewed 21 August 2026

What heads of terms are for

A two-to-four page summary of the commercial deal — parties, price, structure, timetable, conditions — agreed before full contracts are drafted. The value is focus: negotiating the ten points that matter before spending money drafting the two hundred that follow. Investors, banks and boards also read heads as evidence the deal is real.

Binding, non-binding, or both

The default answer should be: mostly non-binding, with named exceptions. The commercial terms stay "subject to contract" so either side can walk if diligence disappoints. But a few provisions should expressly bind:

• Confidentiality — or a separate NDA
• Exclusivity / lock-out — a defined period in which the seller won't shop the deal; note Irish law enforces a promise not to negotiate with others for a fixed period far more readily than an unenforceable 'agreement to agree'
• Costs — who pays what if the deal dies
• Governing law — so any argument about the heads themselves has a home

Say it expressly, clause by clause: "this paragraph is legally binding; the remainder of this document is not intended to create legal relations."

The two classic accidents

Accidentally binding: heads signed without "subject to contract", complete enough on essentials that a court finds a concluded contract — leaving you bound to a deal missing its protections. Accidentally worthless: an exclusivity or costs clause drafted as non-binding along with everything else, discovered only when the other side breaches it. Both are drafting failures, and both are cheap to avoid.

Letters of intent in construction

In building projects, letters of intent are often used to start work before the main contract is signed — a habit that produces expensive litigation when the main contract never follows. If work must start early, the letter should function as a small standalone contract: defined scope, a spending cap, payment terms, insurance, and what happens if the full contract isn't concluded. See our building contracts guide.