Yes, it is becoming more and more common to prepare a letter of intent or term sheet for M&A deals in the PRC. While the letter of intent or term sheet is normally signed as a nonbinding document, it is customary to give binding effect on the following provisions: confidentiality, exclusivity for negotiation, governing law, dispute resolutions and the nonbinding effect clause itself.

• Exclusivity: Exclusivity provisions are commonly included in letters of intent or term sheets, but there are many instances where letters of intent or term sheets do not contain exclusivity provisions.
• Break fee: Break fee provisions are not common but are sometimes seen in the market.
• Confidentiality: Confidentiality provisions are commonly included in letters of intent or term sheets.

It is common to negotiate separate confidentiality agreements and exclusivity agreements.

As a basic legal principle, the PRC Civil Code requires the contracting parties to act in good faith in the negotiation stage. According to Article 500 of the PRC Civil Code, a party shall be liable for damages suffered by the other party if it: (i) pretends to conclude a contract and negotiates in bad faith; (ii) deliberately conceals important facts relating to the conclusion of the contract or provides false information; or (iii) performs other acts that violate the principle of good faith.