The term “Heads of Agreement” is most commonly used in Australia, New Zealand and the United Kingdom. The use of the term “contract-compliant” in trade negotiations justifies the strong presumption that the parties do not want to be bound, particularly if this is understood by use in the sector, but even if the parties begin to comply with the contract provided by contract officials, ensure that this presumption does not always apply. On May 9, 2013, Sackar J of the NSW Supreme Court reaffirmed the principles of when heads of agreements (HOA) will be legally applicable and binding for the parties. In this case, Sackar J. found that the heads of agreements were legally enforceable and binding because: this allegation arose from a settlement of disputes between family members over their respective rights to a business. The mediation agreement stated that an agreement was binding only if it had been written down and signed by the parties or on behalf of the parties. The Tribunal should decide whether the terms of reference constituted a legally binding contract between the parties, as the applicants argued, or whether the document was merely intended to record general terms of transaction that should form the basis of a final and binding transaction, as the defendant claimed. A contract head document should only serve as an introductory agreement to the basic terms of a transaction or partnership. This is done during the pre-contract phase of the negotiations.
An agreement will not be conceptually comprehensive enough to cover all the details necessary for a binding formal agreement. But its lack of detail is also its strength; parties are less likely to find something they disagree on. Once both parties have reached a broad consensus on a partnership or transaction and have signed a contractual document, the next step is to involve lawyers and accountants to reduce the details. These details may contain a number of preconditions that must be met before a final agreement is reached. The next step is the signing of a binding contract, although a contract change can be terminated at any time by both parties with some reservations. The parties agreed on the principle of a transaction and the mediator developed a draft transaction agreement in which the terms were recorded. Unfortunately, the draft treaty was removed due to an inexplicable computer problem before being printed and it could not be restored. The Ombudsman made the decision to write terms by hand.