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What Is a Heads of Agreement?

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  • Written By: G. Wiesen
  • Edited By: Shereen Skola
  • Last Modified Date: 24 November 2016
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A heads of agreement is basically a pre-contract arrangement between two parties that helps outline the general points and conditions that need to be met in a contract. If one party is planning on leasing real estate from another, for example, then they might come together to agree upon general conditions for the lease. A heads of agreement can be created by the two parties from this meeting that sets forth the general terms to be established. This can then be used as a blueprint in the creation of the actual lease contract between the two parties, to which the agreement can be amended or otherwise ignored.

The purpose of a heads of agreement is to establish certain criteria and terms that need to be agreed upon in a legally binding contract. It can be seen as an agreement to come to further accord upon the conditions of a contract. The language used in the agreement is usually, and intentionally, vague but identifies the major terms and conditions that need to be dealt with. In general, this type of document is not considered to be legally binding between the two parties, unless otherwise indicated within it.

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A simple example of this type of agreement could be created between two parties that wish to enter into a lease between each other. Each party can come together and discuss the general terms that need to be indicated and any specific or unusual conditions that should be a part of the actual legal contract between them. This planning stage is used to create a heads of agreement between the two parties, which provides expectations and information about what each party wants. While they can draft this themselves, lawyers and other representatives are often used to create the document to ensure that it is as detailed as necessary.

Although a heads of agreement might be signed by both parties involved in a contract, it is not legally binding and the conditions set within it cannot typically be used for legal recourse. It is simply a document used in the planning stages of a contract and functions as an outline for the actual legally binding one. A heads of agreement can become part of a binding contract, however, if both parties agree to it. This can be done in some instances in which certain conditions within the agreement are established in exacting detail, allowing it to become part of a binding contract and making these terms enforceable by law.

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Inaventu
Post 2

I've only had this "heads of agreement" legal situation come up one time. I wanted to rent some office space in an older building, and the building's owner had a few concerns. He wanted me to confirm in writing that I would be renting the space "as is", for one thing. He didn't want to be personally responsible for any repairs or modifications I would need to make to that space.

I also wanted him to agree to a more flexible lease, in case my business became successful and I needed to move into a larger space or a different location. We agreed to those conditions before we even started on the leasing contract itself.

Ruggercat68
Post 1

I wonder if this is the same legal concept as a "meeting of the minds". It sounds very similar. If two people actually sit down and work out a broad agreement on the terms of a contract, then it could be said they did have an opportunity to get on the same page. That's what I'm getting out of "heads of agreement", too. If I tell somebody I want to buy their car but they need to repair some body damage first, then it sounds to me like we've had a heads of agreement once we both put that condition in writing.

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