Are Heads of Terms Legally Binding?

24th January 2022

To many of us it will be a familiar step in a contractual process; making an agreement at the end of a meeting and writing it down in Heads of Terms or Heads of Agreement.

Heads of Terms

Traditionally, Heads of Terms have been treated as not being legally binding. It has acted as more of an indication of what the parties want to happen. Or as the instructions to the solicitors who will prepare the necessary documentation.

However, the recent case of Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd has shown that you cannot assume that both parties are treating the document as a guide for the formal documentation, instead of as enforceable terms in themselves.

In the case of Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd it was agreed that there was an intention that the Heads of Terms would be legally binding (subject to formal contractual documents) as a precursor to moving forwards. However, if this had been in dispute there could have been additional litigation just to establish the position.

Before entering into any Heads of Terms you should therefore ensure that all parties agree to their status for the project moving forwards. Any disagreement could prove to be a costly affair with the Court deciding the intention instead.

Get in touch

If you are entering into a new project and have reached an agreement, then please contact our Company & Commercial team at Burtons solicitors on 01892 824 577 or Our team can help you make sure you protect yourself from the beginning. Along with ensuring you are familiar with most forms of contracts from business sales and purchases, through to development projects.