# Specialist reference: MOU, letter of intent, heads of terms, term sheet

Load this reference when the requested document is a memorandum of understanding, letter of intent, heads of terms, or term sheet rather than a definitive agreement. It supplements, and does not replace, the base contract-drafter method — run the base classification, commercial-term extraction, definitions, and drafting-notes/open-points output as normal, and apply the steps below in place of the base risk-allocation-as-one-system and exit-provisions steps, which do not fit this document type's binding/non-binding architecture.

Treat the line between what is binding and what is not as the primary drafting problem rather than a label added at the end. Most disputes over this document type are not about a badly drafted clause — they are about a party discovering that a document they thought was a non-binding statement of intent was, in whole or in part, found to create legal obligations, or the reverse: that a provision they needed to be enforceable was drafted in language too tentative to bind.

## Additional required inputs

**Which provisions must be binding regardless of whether the deal proceeds.** Confidentiality, exclusivity or a standstill, allocation of costs if the deal falls through, non-solicitation of employees or customers, and governing law and dispute resolution are the common candidates — plus the non-binding-status clause itself, which has to bind for the rest of the non-binding architecture to work. If the user has not worked through this list, ask them to confirm it rather than assuming which provisions matter enough to survive a collapsed negotiation.

**Governing law**, specifically for its treatment of "subject to contract", preliminary or binding-preliminary agreement analysis, and promissory estoppel — these vary widely between systems and determine whether a document labelled non-binding will actually be treated as such.

Not blocking: whether the definitive agreement type is already known (an SPA, a JV agreement, a supply contract) — knowing this helps keep the MOU from drifting into premature detail that belongs in the later document.

## Additional method

1. **Fix the binding architecture before drafting a single substantive clause.** Draft an early, clearly headed provision — "Status of this document" or equivalent — stating that the document does not create legal relations except for the specifically listed binding provisions, named by clause number or heading. Everything else in the document has to be consistent with that statement; nothing should be left for the reader to infer.
2. **Draft the non-binding, intent-recording provisions in deliberately non-committal language** — "the parties intend to", "it is anticipated that", "subject to the negotiation and execution of a definitive agreement" — and avoid obligation language such as "shall", "agrees to" or "undertakes" in these sections. Word choice is doing real legal work here, not stylistic work, because those verbs are precisely what can tip a reluctant court toward finding binding intent regardless of a label elsewhere in the document.
3. **Draft each binding provision with full, ordinary contractual precision.** Confidentiality, exclusivity, cost allocation, non-solicitation and the dispute resolution clause are meant to be enforceable — draft them using proper obligation language and do not soften them to match the tentative tone used elsewhere. A binding clause drafted in hedging language defeats its own purpose.
4. **Bound the exclusivity or no-shop clause precisely, if there is one** — a defined period, a defined scope of what is restricted, and what happens at expiry. An open-ended or vaguely scoped exclusivity commitment is among the most commonly disputed provisions in this document type.
5. **Draft a clear mechanism for what happens if the parties do not reach a definitive agreement** — an outside date, whether the MOU simply lapses, whether any termination right exists, and what becomes of exclusivity and confidentiality after that point (confidentiality should ordinarily survive; say so expressly rather than leaving it to the general survival doctrine).
6. **Watch for the document specifying commercial terms in enough completed detail that it starts to look like a capable, performable agreement in its own right**, regardless of its label. If the instructions push toward that level of detail, flag the tension to the user rather than resolving it unilaterally.
7. Where the enforceability of the non-binding architecture itself depends on the governing law, do not assert that the label will be given effect. Draft the clause using standard convention and flag it as a point requiring verification.
8. Before delivering the draft, check that the binding/non-binding list in the status clause matches the clauses that follow exactly — nothing binding was left off the list, and nothing on the list is drafted in language that undercuts its own binding status.

## Additional output

Add a **binding/non-binding map** — a table restating which provision is binding and which is not, cross-referenced to clause numbers — as its own output section, positioned right after the draft itself. In drafting notes, include any point where the level of commercial detail risks undermining the non-binding intent. In points requiring verification, include whether the governing law will give effect to the non-binding label and whether the exclusivity period or scope is customary for a transaction of this kind.

## Additional guardrails

- Do not use obligation language in a provision meant to be non-binding. The verb, not just the surrounding label, determines how the clause reads.
- Do not leave any clause's binding status ambiguous. Every provision should be traceable to the status clause's list.
- Do not draft commercial terms in exhaustive, immediately performable detail when the instructions call for a non-binding MOU, without flagging the tension this creates.
- Do not assert that a "non-binding" or "subject to contract" label will be given effect by a court. That depends on the governing law and the actual drafting; flag it as a verification point.
- Do not draft an open-ended or unbounded exclusivity or standstill commitment.
- Do not present the MOU as a substitute for the diligence and definitive documentation that is still to come. It is a step toward that, not a replacement for it.