Heads Of Agreement – What It Is And Its Legal Implications

The term ‘Heads of Agreement’ might conjure up some interesting images with some people thinking of a scene from a Coppola or Scorsese movie with the heads of two mafia families sitting down to agree on a deal. In truth, the reality is a lot less dramatic and no doubt some will be disappointed to discover that a Heads of Agreement (HOA) is simply a legal document, however,  it can certainly be an important legal document in commercial law.

An HOA is somewhat of a halfway house agreement, so it can have far more legal significance than a simple shake of hands or a verbal agreement between two parties. However, it does not have the same level of legal weight as a formal contract. As such it may set out some of the preliminary agreements that have been reached and some of the key terms and conditions but falls short of being the formal contract.

When A Heads Of Agreement Should Be Used

Heads of Agreements can be used in several scenarios relating to commercial, civil, or family law. Its main use in commercial law is when two parties are working towards setting up a commercial partnership. It primarily sets out the expectations and the goals that both parties have for the partnership.