What is a Term Sheet and what is its commercial purpose?

Is it required in every
transaction? Is it a contract? Might the presence of the words “subject to contract” make
a difference to your response (see The Rugby Group Ltd v ProForce Recruit Ltd [2005]
EWHC 70 (QB))?
Term Sheet is a pre-contractual document that outlines key terms in a proposed
transaction. It is not a contract in itself, and its binding nature depends on the specific
wording and the intentions of the parties. The phrase "subject to contract" can make it clear
that the parties do not intend for the Term Sheet to create a legally binding agreement.
Whether a Term Sheet is required in every transaction depends on the parties' preferences
and the complexity of the deal. In many cases, parties use Term Sheets to streamline
negotiations, but they are not mandatory.

It means that the parties don't want to be legally bound until they sign a formal contract. In
England and some other places, using this phrase is a way to make it clear that they're still in
the negotiation stage. This phrase was important in a legal case called "The Rugby Group Ltd
v ProForce Recruit Ltd" because it showed that the parties didn't want their earlier
discussions to be a binding contract.

The Rugby Group Ltd v ProForce Recruit Ltd [2005] EWHC 70 (QB):
The case revolved around a dispute regarding whether the communications between the
parties formed a legally binding contract or were still in the negotiation phase. The key point
of contention was the presence of the phrase "subject to contract" in their correspondence.

The court ultimately ruled that the inclusion of "subject to contract" in their
communications indicated that the parties did not intend to be legally bound until a formal
contract was executed. This case highlights the importance of clear language and the
"subject to contract" phrase in determining the parties' intentions in contract negotiations

See Maple Leaf Macro Volatility Master Fund v Rouvroy and Trylinski ('Cases' below) (key
paragraphs are 217, 222, 228, 229, 237 and 242):
How did the court rule on the uncertainty and lack of intention arguments? Do you agree
with the court’s findings?

Uncertainty Argument: the court found that the fact that the parties did not agree on
certain details, such as the exact timing of the transaction's execution, did not render the
agreement too uncertain to be enforced as a contract. It held that in the absence of an
express agreement, there was an implied term that the parties would execute the
transaction within a reasonable time. The court concluded that the uncertainty regarding
execution timing did not make the contract unenforceable.
Intention Argument: the court rejected the argument that the parties didn't want to create
a legally binding contract. The court said that, based on common contract principles and the
context of their business dealings, it was clear that both parties intended to be legally
committed to their agreement. They just planned to make a more detailed written contract
later. So, even though they didn't have all the fine details in writing, they did want a real,
enforceable agreement.

The court appropriately considered the market context and the parties' behaviour in a
distressed debt trading scenario. This reflects a practical approach to contractual intent
analysis, which is in line with the evolution of contract law. The court's
acknowledgment of the common market practices and the flexibility in forming contracts
without strict formalities aligns with the realities of business transactions.
The court's emphasis on the flexibility of contract formation, even when some details are
deferred for later agreement, is consistent with modern contract law. This flexibility is
essential in accommodating the complexities of contemporary business negotiations.
However, under traditional views, a valid contract must be sufficiently certain in its terms to
be enforceable.