Letter of intent versus term sheet

Both measured exhibits open as letters. The letter of intent carries a sender's address block, the date 8 June 2021, a named addressee at a street address, a subject line and a salutation naming the addressee. The term sheet carries an address block, the date 2 October 2017, the salutation "Dear ****," and one cover sentence: "Further to our discussions, we are pleased to present this ***** Binding Term Sheet for the acquisition of *****, subject to the conditions precedent listed below." The counterparty name is redacted with asterisks throughout the filed copy.

The bodies diverge. The letter of intent runs ten pages of numbered paragraphs of prose under two part headings, and ends with three signature blocks spread across its last two pages. The term sheet runs five pages of a two-column layout — eighteen capitalised labels down the left, EFFECTIVE DATE, BUYER, SELLER, CONTEMPLATED TRANSACTION, CONSIDERATION, TIMING and twelve more, each with a short block of text beside it — and ends with two signature lines printed side by side and no date lines at all.

Both sit at the same point in a transaction: after the commercial conversation, before the definitive agreement. For acquisitions to which 16 CFR 801.30 does not apply, the Hart-Scott-Rodino notification rules name three instruments at that point in one phrase, requiring "an affidavit attesting that a contract, agreement in principle, or letter of intent to merge or acquire has been executed, and further attesting to the good faith intention of the person filing notification to complete the transaction", and then treat that instrument as distinct from the definitive agreement it precedes.

OctoDoc, the signing system of record, treats either of them as one file, and what carries into the record is not the layout but where the binding half of the text sits and which parties are bound by it. This page describes a class of instrument in general terms and is not a substitute for the advice of an attorney.

The party sets are shaped differently. The measured letter of intent binds three parties — an acquiring corporation, the target company and an individual shareholder — and one human signs twice, once as chief executive of the company and once in a personal capacity. The measured term sheet binds two, a buyer and a seller, each with one officer signature.

The letter of intent prints a sequence. Its closing paragraph asks the addressee to sign and return a copy; the purchaser's block sits on page nine and the addressee's on page ten, under the heading "Acknowledged as to the Nonbinding and agreed as to the Binding Provisions". The term sheet prints two signature lines side by side on its final page with no return instruction and no date lines, so nothing on its face fixes an order. Across the pair the routing is mixed rather than uniformly sequential.

Neither form is signed before the other; they are alternative instruments for the same stage. What the record does show is re-execution within a form. Paragraph 3(d) of the measured letter of intent states that its own execution terminates a previous letter of intent between two of the same parties, executed five days earlier on 3 June 2021.

The failure mode for this pair is a file whose binding and non-binding halves are not separated on its own face. Both measured exhibits do separate them, by different devices. The letter uses two part headings and a termination paragraph naming which paragraphs survive: "Upon termination of the Binding Provisions, the parties shall have no further obligations hereunder, except as stated in Paragraphs 1, 5, 6, 8, 9, 14, and 15 of these Binding Provisions, which shall survive any such termination." The term sheet uses one labelled row carrying a single sentence: "This document is meant to have the character of a binding term sheet which will be formalized in Definitive Agreements on or around December 31, 2017." A 2026 press release filed as an 8-K exhibit describes a third instrument at the same stage as drawing the line by naming its exceptions: "The MOU remains non-binding, except with respect to certain customary provisions, including exclusivity (no-shop), confidentiality, and expense allocation, and supersedes the prior memorandum of understanding dated January 22, 2026, as amended."

Where no such device is present, the division has to be reconstructed from prose, and the sealed record shows assent to the whole file with no marker of which half the parties treated as operative. A record cannot supply a distinction the document never drew.

Position varies inside each form. In the ten-page letter the binding part opens on page three, but its exclusivity paragraph does not begin until page five and its survival list not until page eight — five pages after the heading that governs them. On the five-page term sheet the row declaring the character of the document opens page two, while the no-shop row carrying the ninety-day restraint is the last of the eighteen and closes page four.

A file of either form is dropped in and the counter proposes the party set, the roles, the routing order and the marks on one confirm screen. Nothing is bound until a human confirms it, so a three-party letter of intent carrying five marks and a two-party term sheet carrying two are prepared the same way and reviewed once rather than dragged field by field.

The Margin answers a question about the file and resolves the answer to a page and a rectangle. A question about which paragraphs survive termination lands on the sentence that lists them, not on a paraphrase of it, and the citation is a coordinate in the file rather than a claim about it.

A post-v1.0 read-link design would produce a reading log with per-page reading data, which could be useful on a ten-page letter whose survival list does not appear until page eight. A proof file and no-account public verification are also post-v1.0 designs.

The software records what a document says and where it says it. It does not classify a provision as binding or non-binding, and it does not tell a party what the split in a particular file means for them.

Nobody wants to read the contract. OctoDoc is being built so you do not have to: write a document from a prompt, ask plain-language questions about the one you were sent, and keep every one of them in a single place instead of four accounts and an inbox.

Anyone can check a sealed file with no account.

Unlimited human sends on the paid tier.