The Aryavarth Express
Agency (Bengaluru): The Karnataka High Court has determined that a term-sheet, which outlines the conditions for a business buyout, does not constitute a binding legal agreement unless it is followed by the signing of a definitive agreement. The court stated that such a term-sheet represents merely an initial offer, which expires either after a specified timeframe or upon the execution of a comprehensive final contract. Justices Anu Sivaraman and Anant Ramanath Hedge presided over the case.
In this specific case, a term-sheet was signed on December 8, 2022, between two parties agreeing on the sale of a plot of land for 38 Crores INR, contingent upon fulfilling certain conditions and finalizing a definitive agreement within 60 days. The deal did not conclude within this period, leading the seller to arrange a sale with another buyer. The original buyer sought legal intervention to prevent this new sale, arguing that the term-sheet was a conclusive contract.
During the court proceedings, the initial buyer claimed readiness to fulfill their obligations and blamed the delay on the seller’s failure to provide necessary documentation. However, the seller refuted this by stating there was never a formally concluded contract and that the discussions were mere negotiations.
The High Court analyzed the situation, observing that the term-sheet set a 90-day validity or until a definitive agreement was signed, whichever came first. As neither a definitive agreement was signed within this period nor any monetary exchange occurred under the term-sheet, the court affirmed it as merely an initial offer rather than a binding contract.
The ruling underscored that without a formal agreement, such preliminary documents as term-sheets do not hold legal enforceability. The court’s decision aligns with established legal principles that emphasize the necessity of explicit agreements in forming binding contracts. Consequently, the appeal by the initial buyer was dismissed, establishing a clear precedent on the necessity of definitive agreements in contractual disputes.
