Is it customary to prepare a letter of intent or term sheet and, if so, to what extent are they binding on both parties?
Heads of terms, letters of intent, expressions of interest or term sheets are customary in Egypt. Such documents are usually non-binding except for the clauses relating to exclusivity, confidentiality, governing law and dispute resolution. Egyptian law places great emphasis on the intent of the parties, so any such documents must make clear that they are not intended to create binding obligations. These documents must have a longstop date to enable the parties to pursue a different transaction after a certain period of time.
Does a term sheet, in this context, customarily include provisions on exclusivity, break fee or confidentiality?
Term sheets typically include an exclusivity period that commonly ranges from 60 to 120 days, during which the seller agrees not to engage with any third party regarding the underlying asset or shares.
They also include a strict confidentiality clause applicable to both parties, with only certain exceptions relating to disclosures required to be made by law.
In some cases, a break fee is agreed to cover for potential costs incurred by the non-breaching party, although this commonly negotiated.