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A Head of Terms document is a piece of literature which is drafted at the beginning of a proposed transaction. The aim of this document is to clearly depict the principal terms which have been agreed by both parties involved and it operates as a constructive tool in which to help each party focus on the details in which to make their main contract. As it is perceived as a draft of the main contract, a Head of Terms document will not be a legally binding contract which means that both parties will only be subject to the detailed terms which will be described within the main contract. In the case where this document is drafted for the use of native speaking parties, this can be a simple task which results in a swift agreement. However, when this document is used in order to draft the initial proposal between two parties who do not speak the same language, this can cause a range of issues which can halt the whole process.

Within business, a Head of Terms document is extremely important in order to begin the contract process. When making a legal business agreement with an overseas company, this will be a crucial document to have in order to guarantee the success of a deal. However, both parties need to be able to not only state their requirements of the draft to the opposite company, but also need to be able to clearly identify the requirements that the other party have. It is for this reason that when it comes to drafting a Head of Terms agreement, that having a legal translation of the document for the benefit of both parties can help eliminate any confusion or dispute from either side. In many cases, either business may understand some aspects of the others language, but without a clear knowledge of the language, information can become scrambled which can potentially lead to disagreements as to what was initially agreed to be placed within the draft. If this happens, this could result in the termination of the main contract which is a loss for both sides.

Within a Heads of Term agreement, there are a variety of different points which need to be understood and agreed by both parties. These can include:

  • The nature of the agreement
  • A description of the transaction and what will be sold
  • The price of the sale and the method in which it will be paid
  • A timetable of completion of the transaction and accounting details

Due to money nature of the transaction, it is vital that both parties can fully understand the details of the said agreement. With a translation completed by a legal translator in place, both parties will be provided with an exact copy of the said agreement, written in their native language which clearly states all important issues. By being well informed of the agreement, both parties will not be lead into confusion or dispute, helping the finalization of their final contract run all the smoother.

However, do not waste the effort and success. Make sure that the final agreement is also translated using a legal translation service.