Preliminary documents | Venezuela | Global Private M&A Guide - Limited External Content

Preliminary documents

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Is it customary to prepare a letter of intent or term sheet and, if so, to what extent are they binding on both parties?

Parties in a negotiation typically use a letter of intent. Although in many cases buyers may proceed in negotiations with sellers using such letters of intent (stipulating only a few provisions that are intended to be legally binding like confidentiality and exclusivity), under Venezuelan law, these pre-contractual letters will not necessarily have a legal effect because whether or not a letter will create legal obligations depends on the substance of what is said and not its format. In the pre-contractual phase, the parties must act in good faith.

Does a term sheet, in this context, customarily include provisions on exclusivity, break fee or confidentiality?

Exclusivity: Exclusivity provisions are commonly used in letters of intent.
Break fee: Break fees are not commonly used in letters of intent.
Confidentiality: Confidentiality provisions are commonly used in letters on intent.

Are exclusivity, break fee and confidentiality provisions supplemented with separately negotiated agreements?

Exclusivity, break fee and confidentiality provisions are rarely supplemented with separately negotiated agreements (only in a few cases involving share purchase agreements).

Is there a duty or obligation to negotiate in good faith?

In the pre-contractual phase, the parties must act in good faith.

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