It is customary to prepare a letter of intent or term sheet at the beginning of the transaction.

A letter of intent or term sheet is not generally binding on the parties, except when expressly provided therein. A letter of intent or term sheet would normally provide which provisions are binding on the parties.

• Exclusivity: Yes, it is common practice to include a provision on exclusivity.
• Break fee: A break fee is not common.
• Confidentiality: Yes, it is also common practice to include a provision providing for confidentiality.

No. It is not common for separate agreements on exclusivity, confidentiality and break fees to be subsequently entered into by the parties. However, these terms may be further negotiated and corresponding provisions may be included in the definitive agreements (i.e., asset purchase agreement/share purchase agreement).

Yes, the Civil Code of the Philippines (Civil Code) provides that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." A party may claim damages for negotiating in bad faith under the foregoing provision of the Civil Code.

Moreover, a claim for damages may also be made under the following provisions of the Civil Code:

• Art. 20: Every person who, contrary to law, willfully or negligently causes damage to another shall indemnify the latter for the same.
• Art. 21: Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.