Heads of Terms agreement is a document that sets out the terms of a commercial transaction agreed in principle between parties in the course of negotiations.

Heads of terms shows serious intent and have moral force, but do not legally compel the parties to conclude the deal on those terms or even at all. However, provisions relating to confidentiality and costs may be binding on the parties.

Heads of Terms agreements may also be known as letters of intent, memoranda of understanding, heads of agreement, letters of potential interest, term sheets or protocols