Bridging US–UK Deal English: Mastering heads of terms vs term sheet wording for cross-border clarity

1) Anchoring the concept: what these documents are—and are not

Before you draft or negotiate, you must be clear about the function of a UK “heads of terms” and a US “term sheet.” Both documents are pre-contract outlines that record the parties’ current commercial understanding on a proposed deal, especially in mergers and acquisitions. Their core purpose is to align expectations, set a roadmap for drafting definitive agreements, and allow decision-makers to check feasibility before spending more time and money. Despite this shared purpose, the two documents live in slightly different legal and drafting cultures, and those differences influence form, tone, and risk.

In the UK, a heads of terms document is often a brief summary of key points agreed in principle. It frequently appears after initial discussions and before detailed due diligence or drafting of the share purchase agreement (SPA) or asset purchase agreement (APA). The UK tradition views the heads as non-binding in respect of the commercial terms, unless certain sections are expressly carved out as binding (for example, confidentiality, exclusivity, costs, and governing law). Because UK courts are cautious about enforcing an “agreement to agree,” UK drafters usually include a strong non-binding statement and avoid language that appears definitive, such as “shall purchase” or “will complete,” when referring to the future definitive agreement.

In the US, a term sheet also distills key business terms before definitive agreements are prepared, and it often appears at a similar stage. However, US practice can skew more granular in its bullet points and more explicit in signaling which provisions are binding and which are not. US drafters are attentive to litigation risk related to preliminary agreements. As a result, a term sheet typically contains conspicuous headers for “Non-Binding Terms” and “Binding Provisions,” and it may include a deliberate disclaimer stating that no party is obligated to consummate the transaction until definitive agreements are signed by all parties. US readers expect bold, capitalized disclaimers and unambiguous conditional language to minimize the risk of accidentally forming a binding contract.

Crucially, neither document is intended to be the final, fully negotiated contract. Neither should try to do the job of the definitive SPA or APA, which will contain detailed representations, warranties, indemnities, covenants, and conditions. At the same time, both instruments can carry real-world effects: they shape deal momentum, signal bargaining positions, and set the tone for due diligence and drafting. They also commonly contain binding commitments on confidentiality and exclusivity, so they are not “toothless.” Your job as a cross-border drafter is to state clearly which parts bind the parties and which parts do not, while capturing the commercial intent that brings the parties together in the first place.

2) Clause mapping: equivalents and wording contrasts that change risk

A practical way to navigate the two styles is to map common clauses and isolate the wording features that shift risk or create enforceability signals. The goal is clarity: say the same commercial thing in each dialect without accidentally changing the legal temperature.

• Parties and transaction type

  • UK heads of terms: Often a short narrative identifying the buyer, seller, and the proposed acquisition (shares or assets). The tone may be descriptive (“The Buyer proposes to acquire 100% of the issued share capital”).
  • US term sheet: Typically uses labeled bullets with defined terms (“Buyer,” “Seller,” “Transaction: Purchase of 100% of the outstanding shares”). The US style prefers tight, defined terms early, signaling a more checklist-like approach.

• Purchase price and adjustments

  • UK: May reference “consideration” and outline price, completion accounts or locked-box mechanics, earn-outs, and timing of payments. The UK wording may be more narrative and less capitalized, and may reference “Completion” terminology.
  • US: Often lists “Purchase Price,” specifies “Closing,” and lists “Purchase Price Adjustments,” with sub-bullets for working capital targets, escrow, holdbacks, and earn-out metrics. The US wording favors clear subheadings and specific triggers.

• Conditions to signing/closing

  • UK: Heads may outline key conditions (regulatory approvals, shareholder consents, financing) but often defer the precise drafting to the definitive agreement. Conditional verbs such as “subject to” and “would include” help signal non-binding status for commercial terms.
  • US: Term sheets set out “Conditions to Closing” with explicit, itemized conditions. The US style often stresses that no obligation to close exists until all conditions are satisfied and definitive agreements are executed, reinforcing the non-binding framework for core terms.

• Exclusivity/no-shop

  • UK: Often labeled “Exclusivity” and may specify duration and scope. It is commonly treated as binding and can include a break fee in some markets. Wording tends to avoid capitalized shouting, but clarity is key.
  • US: Labeled “Exclusivity” or “No-Shop,” often with caps and bold for “Binding Provisions.” US drafters may include detailed carve-outs and explicit remedies, and they commonly state that breach can cause irreparable harm, reserving equitable remedies.

• Confidentiality

  • UK: A short clause may say the parties will keep negotiations confidential, sometimes referencing an existing NDA. Treated as binding and phrased in a straightforward manner.
  • US: A discrete “Confidentiality” section typically references an existing NDA and confirms its continuing effect. The US version may add detail on permitted disclosures and remedies.

• Timeline and milestones

  • UK: Might speak of “target Completion” or “indicative timetable,” reinforcing that timing is indicative, not binding for the commercial core.
  • US: Uses “Target Closing Date,” “Outside Date,” or “Long-Stop Date” (less common than in UK but used), while insisting that dates are aspirational unless included under binding sections (rare at term sheet stage).

• Governing law and venue

  • UK: Heads may select “English law” with English courts or arbitration. Even in non-binding heads, this clause is often binding for disputes concerning the heads themselves (e.g., exclusivity breaches).
  • US: Term sheets often choose “New York law” for cross-border transactions, with New York courts or arbitration. This is usually listed among “Binding Provisions.”

• Costs and expenses

  • UK: Heads may state each party bears its own costs, typically binding.
  • US: Same concept, flagged as binding.

Wording contrasts matter. In the UK, soft modal verbs (may, would) and descriptive tone signal that commercial terms are subject to contract. In the US, precision and conspicuous disclaimers go further, stating explicitly: “This term sheet is non-binding except for Sections X, Y, Z.” In short, UK style relies on an overall “subject to contract” framing plus cautious phrasing, while US style uses structural signaling, typographical prominence, and categorical lists of binding vs non-binding items. If you carry over firm verbs like “shall” or “will” from a heads of terms into a US term sheet without a non-binding disclaimer, you can unintentionally raise the appearance of an enforceable promise. Conversely, if you bring US-style bolded binding labels into a UK heads of terms but forget to include the classic “subject to contract” banner, a UK court might still parse the language for intent to be bound.

3) Conventions and tone: formatting, register, and drafting signals

Drafting conventions communicate intention as much as content. Beyond word choice, the visual and structural elements tell the reader what to take seriously and how to interpret the promises.

• Formatting

  • UK heads of terms: Tends to be shorter, with plain paragraphs or simple bullets. Capitalization is modest. Headings are neutral. The document often includes “Subject to contract” prominently at the top and sometimes in the footer. The visual feel is calm and businesslike, emphasizing that the parties are still negotiating.
  • US term sheet: Uses headings, subheadings, defined terms in Initial Capitals, and consistent bulleting. Critical disclaimers and binding carve-outs may be bolded, capitalized, or boxed. The format looks more like a structured checklist that can be handed to drafting counsel to build the definitive agreement.

• Register and tone

  • UK: More narrative; relies on context and convention to communicate non-binding nature. Avoids promissory language for commercial points. Prefers “Completion” over “Closing,” and “consideration” over “purchase price” in some teams’ styles (both are used, but choice can signal familiarity with UK practice).
  • US: Direct, itemized, and result-focused. Uses “Closing,” “Purchase Price,” “Conditions to Closing,” and so on. The register often anticipates later insertion into definitive agreements, so it favors precise, modular phrasing.

• Modal verbs and promissory signals

  • UK: Non-binding commercial terms often use “would,” “proposes to,” “intends to,” or “the parties contemplate.” Binding carve-outs use clearer verbs but still avoid over-engineering.
  • US: Non-binding language is explicit: “Non-Binding Terms.” When a section is binding, the US style adopts strong verbs (“shall,” “will”) and may state remedies or reference equitable relief. The explicit bifurcation of binding vs non-binding is central to the US reader’s expectations.

• Punctuation and definitions

  • UK: Fewer defined terms at the heads stage; commas and semicolons are used in a flowing narrative. Definitions may be minimal or rely on everyday meaning.
  • US: Early definition of terms is common. Lists are separated cleanly. Parenthetical definitions are frequent (“Seller,” “Buyer,” “Transaction”). This reduces ambiguity later in the drafting process.

These conventions are more than style choices. They guide courts and negotiators in interpreting intent and risk allocation. For instance, a UK-style sentence that says “The Buyer will acquire 100% of the Shares on Completion” without a conspicuous non-binding notice could look like a commitment. A US-style term sheet with a prominent “Non-Binding” header and a line stating that “no party shall be under any legal obligation whatsoever with respect to the transaction unless and until a definitive agreement is executed” reduces that risk. Matching form to forum is therefore part of good cross-border hygiene.

4) Conversion practice and diagnostics: preserving intent and spotting red flags

When you convert a UK heads of terms into a US-style term sheet, or the reverse, your priority is to preserve the commercial bargain while aligning signals about enforceability with the target jurisdiction. The commercial intent includes price, structure, timeline, and risk-sharing mechanisms. The legal signals include non-binding disclaimers, binding carve-outs, and governing law choices. Both must survive the conversion intact.

A disciplined approach starts with a clause inventory. Identify the following: parties, transaction structure, price and adjustments, conditions, timeline, exclusivity, confidentiality, governing law and venue, costs, and any other commitments. Then mark which items are intended to be binding at the pre-contract stage. In a UK-to-US conversion, you will likely introduce clearer headings, defined terms, and a bold non-binding disclaimer for commercial terms. You will also formalize binding provisions into a separate section with explicit verbs and, if appropriate, remedies. In a US-to-UK conversion, you may soften the visual hierarchy, reduce excessive capitalization, and ensure “Subject to contract” appears prominently, while keeping any intended binding provisions clear and proportionate in tone.

Next, address terminology traps. “Completion” in UK practice roughly aligns with “Closing” in US practice, but the cultural weight differs. “Consideration” may be read broadly in the UK; “Purchase Price” is the US staple. “Long Stop Date” is common in UK documents; “Outside Date” or “Drop Dead Date” appears more often in US deals. Replace terms carefully and ensure that timing concepts—such as conditions, consents, and funding availability—remain equivalent in effect. Mislabeling these items can mislead counterparties about when risk transfers or when obligations crystallize.

Now check enforceability signals. In a UK heads, non-binding intention is typically communicated by the overall “Subject to contract” banner and cautious verbs, with specific, short binding clauses for exclusivity, confidentiality, costs, governing law, and sometimes non-solicit or non-hire provisions. In a US term sheet, you need an explicit non-binding statement, plus a clean list of binding clauses. If a UK clause uses “shall” for a commercial term (e.g., “The Buyer shall pay £X on Completion”), converting to a US term sheet without adding a non-binding disclaimer could elevate the apparent commitment. Conversely, importing US bold, capital-letter disclaimers into a UK heads without aligning tone and removing definitive verbs can look aggressive and may unsettle the counterparty. Adjust verbs accordingly: replace “shall” with “would,” “intends to,” or “proposes to,” unless the clause is designed to be binding at the heads stage.

Finally, run a quick red-flag checklist to catch common cross-border pitfalls:

• Binding language in a non-binding document

  • If non-binding is intended, remove promissory verbs for commercial terms and add an explicit non-binding statement. In US practice, segregate binding provisions clearly. In UK practice, maintain “Subject to contract.”

• Governing law and venue mismatches

  • Ensure that the pre-contract binding clauses point to an appropriate governing law and forum. Avoid selecting a law that conflicts with later definitive agreements unless intentional. Be aware that enforceability of exclusivity or break fees can vary by jurisdiction.

• Terminology traps

  • Align “Completion” (UK) with “Closing” (US), “consideration” with “Purchase Price,” and “Long Stop Date” with “Outside Date.” Confirm that definitions of “Material Adverse Change,” “Working Capital,” or “Net Debt” will be expanded in the definitive agreements; avoid overly rigid definitions at the term sheet/heads stage.

• Over-specificity too early

  • Avoid loading the heads/term sheet with detailed representations, indemnities, or complex covenants that belong in the definitive agreements. Excess detail can accidentally harden expectations or create inconsistencies later. Keep the outline clear and high-level, but precise where needed for binding carve-outs.

• Signature etiquette and execution formalities

  • UK heads are often signed “for acknowledgement” rather than “as a deed,” to emphasize non-binding commercial terms. US term sheets are commonly signed with clear statements that signatures do not create a binding obligation to consummate the transaction (except specified provisions). Place signature blocks under language that preserves the intended effect.

• Exclusivity leakage

  • If exclusivity is binding, define scope, duration, and permitted contacts (e.g., communications required by law). Consider remedies and a clear end date. Ensure the jurisdiction chosen will enforce the clause predictably.

• NDA overlap

  • If a separate NDA exists, reference it correctly and confirm it remains in effect. Do not create conflicting confidentiality standards in the heads/term sheet. Avoid accidentally widening disclosure rights.

• Timing and dependencies

  • When you state timelines, flag them as indicative unless parties truly want them to bind. Note dependencies: regulatory approvals, financing availability, and third-party consents. In US term sheets, list conditions to Closing; in UK heads, confirm they will be set out in the definitive agreements.

By applying this structured method—inventory, terminology alignment, enforceability signaling, and red-flag review—you preserve commercial intent and reduce the risk that cultural drafting differences produce unwanted legal effects. The result is a document that communicates the same deal in two different dialects, with equal clarity and appropriate caution.

In cross-border practice, effectiveness depends on consistency: your drafting choices should echo the expectations of the governing law and the reader’s market norms. A UK heads of terms should look and sound like one, and a US term sheet should carry the unmistakable markers of US preliminary documentation. When you honor those conventions while keeping the parties’ commercial bargain intact, you not only prevent misunderstandings—you accelerate the path to a definitive agreement that truly reflects what the parties intended to do.