Are Series A term sheets binding?

Generally there is an explicit disclaimer on all term sheets that they are not binding contracts, but just offers to start negotiations. Either party may refuse to proceed with the transaction at any time before the closing. Investors can change their minds about investing and entrepreneurs may find a better offer and decide to go with it. Some courts, however, held in the past that if a term sheet is detailed enough and contains all necessary elements of a contract it could impose a duty to negotiate in good faith on the parties. Meaning, they must have a good reason to opt out. Entrepreneurs are strongly advised to consult with an experienced business attorney, who practices in the jurisdiction where they are negotiating a deal, before signing anything.

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