The High Court delivered a sobering reminder in June of this year in respect of the need for parties to be clear as to their intentions with regard to heads of terms.
The case of Abberley v Abberley involved a family land dispute. At a mediation the parties reached agreement on how the land would be divided up and this was written out and signed by the parties' respective solicitors. The agreement was a short form handwritten set of heads of terms.
The case involved a dispute as to whether the heads of terms comprised a binding agreement between the parties. The High Court found that the commercial essentials were set out in a signed document with sufficient certainty to amount to a binding agreement. The fact that attempts were made to agree further details post signature did not detract from that certainty. Nor did the fact that a more formal document was envisaged preclude the existence of a binding agreement.
Whilst perhaps specific and unusual facts are involved in this case we should still consider it as a warning. Take the time to look afresh at your heads of terms before issue and consider:
- do you need a signature?
- is there a simple statement in the document to the effect that this is not intended to be binding and is subject to contract?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.