Term sheet lawyer Paris: read and negotiate the letter of intent before signing.

Not necessarily. Signing a term sheet is not, on its own, enough to create an obligation to complete the investment. Everything depends on what the document fixes and what it leaves to be negotiated. Article 1112 of the Civil Code lays down freedom of pre-contractual negotiations, subject to the requirement of good faith. In a dispute in which an investor claimed repayment of a payment of €30,000, the Paris judicial court (tribunal judiciaire) noted that the document was drafted in the conditional, that it fixed neither the number of shares nor the percentage of capital, and that it merely provided for the legal documentation to be negotiated. It inferred that the letter of intent recorded "the parties' agreement on the principle of an investment and their intention to negotiate in good faith to define its precise terms, and not a share sale contract" (our translation) (TJ Paris, 23 January 2024, No. 21/12823). The company was ordered to repay the sum paid. This remains a first-instance decision, made on a specific document. A more complete term sheet, identifying the securities, the price and the intention to be bound, might be analysed differently. This is why the firm reads each clause before characterising the document.

A letter of intent becomes an offer when it meets the conditions of Article 1114 of the Civil Code: it contains the essential terms of the contemplated contract and expresses its author's intention to be bound upon acceptance. Failing that, the text states that there is merely an invitation to enter into negotiations. For a transfer of securities, the essential terms are the thing sold and the price, under Article 1583 of the Civil Code. The Court of Cassation approved a court of appeal that had found an offer in a proposal covering a percentage of the shares of a company yet to be formed and a fixed price, holding that "It follows that an offer to transfer shares expressed as a percentage of the share capital proposed to be transferred satisfies the requirements of Article 1114 of the Civil Code" (our translation) (Cass. com., 17 September 2025, No. 24-10.604). The lack of numbering of the securities did not make the proposal equivocal. The practical consequence is direct: a unqualified acceptance of this type of document can form the sale. Before replying to a letter that already fixes the securities and the price, it is therefore necessary to check the reservations it contains and the form of the acceptance envisaged.

No, the investor's offer forms the contract only if the company accepts it. Article 1113 of the Civil Code provides that a contract is formed by the meeting of an offer and an acceptance. In a case heard by the Versailles court of appeal, a shareholder had signed a form stating a firm and irrevocable commitment to invest one million euros. The court accepted that this form was an offer, while recalling that "by construction, a contract can only be formed by the meeting of the will of the offeror and the acceptor" (our translation) (CA Versailles, ch. com. 3-2, 13 October 2026, No. 25/06248). In the absence of acceptance by the holding company, the court concluded that "The alleged investment contract was therefore not formed" (our translation) and upheld the dismissal of the investor's claims. This decision is unfavourable to the party who had committed: the email received from the holding company, which mentioned neither the amount of the investment approved nor the number of shares allotted, did not show acceptance of her offer. It is therefore in the investor's interest to obtain written confirmation stating the investment accepted, to make it easier to prove.

Most term sheets distinguish between the terms of the transaction, presented as indicative, and a few clauses declared binding from signature. In practice these are exclusivity, confidentiality, the allocation of costs, the governing law and the duration of the document. This distinction is effective when it is clear. In a joint venture case, a framework agreement declared itself non-binding, except for several articles, including the one providing for exclusivity of the negotiations. The Paris court of appeal held that this clause came with "no right to interrupt the continuation of exclusivity before the end of the negotiation" (our translation) and upheld the judgment against the companies that had pursued a parallel project with another partner (CA Paris, pôle 5 ch. 11, 21 March 2025, No. 22/18017). The general non-commitment statement therefore did not protect the party that had agreed to a specific exclusivity. For each binding clause, the firm checks its duration, its starting point, its sanction and how it fits with the clause allowing the discussions to be ended.

When exclusivity expires, each party in principle regains its freedom to negotiate with others and to end the discussions, subject to the good faith required by Article 1112 of the Civil Code. The Paris court of appeal so held in a proposed transfer of 80.24% of the share capital of a company: the letter of intent provided for exclusivity until 15 October 2022, extendable by one month. The dispute pitted the selling holding companies against their agent, instructed to find a buyer, who claimed the fee provided for by the mandate if exclusive negotiations were broken off. As no agreement had been concluded by those dates, exclusivity had ended when the sellers refused to sign the documents, "they having regained their freedom and being able to end the negotiations" (our translation) (CA Paris, pôle 4 ch. 1, 2 October 2026, No. 24/19808). The court set aside the judgment that had ordered them to pay and dismissed the agent's claim. This decision is unfavourable to the intermediary, whose fee presupposed negotiations that were still exclusive. It does not rule on any claim by the prospective buyer, whose action for liability in the event of wrongful break-off of the talks it reserves. For the buyer or investor, the lesson is to negotiate a realistic duration, an automatic extension in the event of delay not attributable to them, and a timetable for delivery of documents. For the seller, a short duration and a firm date preserve the possibility of turning to another candidate, provided the mandate given to the intermediary is also reread.

Yes, provided a fault in the break-off is proved, but compensation remains limited. Article 1112 of the Civil Code prevents compensation for a negotiation fault from covering the profits hoped for from the failed transaction or the lost chance of obtaining them. Fault is assessed in the light of how far the discussions had progressed, the reason given at the time of the break-off and the conduct of the party responsible. In a case decided by the Versailles court of appeal, the break-off was held to be wrongful and the court stated that "compensation for losses is limited to the loss incurred, namely the costs incurred by the victim of the wrongful break-off to bring the negotiations to a successful conclusion, provided that they correspond to useful and coherent steps given how far the negotiations had progressed" (our translation) (CA Versailles, 25 January 2024, No. 19/07929). A study expense justified by a mere accounting credit was excluded. In practical terms, the company on the receiving end of the break-off should keep the invoices of lawyers, auditors and advisers, with the date and purpose of each service. Quantifying a lost valuation or a missed financing cannot be compensated on this basis.

Generally not, for lack of a contract. Where the letter of intent merely records the intention to enter into talks, it creates only an obligation to negotiate fairly, and a fault committed in the negotiation falls under tort liability. The Angers court of appeal recalled this to sellers who accused the prospective buyer of having prolonged the discussions and then sharply reduced its offer. It held that "the parties' mere agreement in principle to undertake to negotiate a contract whose terms were yet to be determined, and to cooperate in good faith in determining them, does not in itself constitute a contract" (our translation) (CA Angers, ch. A com., 23 September 2025, No. 20/00488). The sellers, who had sued only on a contractual basis, were dismissed. This decision is unfavourable to the party suffering the break-off, and it turns on the choice of legal basis. The firm therefore checks from the outset whether the term sheet contains reciprocal commitments, such as exclusivity or an obligation to deliver documents, before choosing between a contractual action and an action based on fault in the negotiations.

Double signature is not enough. The Paris court of appeal examined a letter headed letter of intent to acquire, signed by the selling manager, the prospective buyer and their advisers. It noted that such a letter, in a transfer of securities, "usually records the parties' intention to begin or continue negotiations and thereby to frame their talks" (our translation) (CA Paris, pôle 5 ch. 8, 3 November 2022, No. 19/16095). The same decision states that "The fact that this letter of intent is signed by both parties does not in itself demonstrate a commitment by the holder of the securities to transfer them to the other party" (our translation). The document also stipulated that the only obligation arising from its signature was to negotiate in good faith. The claims of the prospective buyer, who argued that the sale was complete, were dismissed, which makes the decision unfavourable to the party who had relied on the letter. To characterise such a document, the judge interprets the common intention of the parties, in accordance with Article 1188 of the Civil Code. A clause that expressly limits the commitment to negotiation carries great weight in that interpretation.

Under Article 1112-1 of the Civil Code, the company must disclose the information it knows and which is of decisive importance for the investor's consent, where the investor is legitimately unaware of it or relies on the company. Decisive information is information that has a direct and necessary connection with the content of the contract or the capacity of the parties, and this duty does not extend to the estimation of the value of the performance. Setting up a complete data room plays an important role in the judge's assessment. In a sale preceded by a letter of intent providing for due diligence, the Court of Cassation approved a court of appeal that had ruled out any breach by the sellers, since the prospective buyer, "who had access to all the accounting information on the doubtful receivables, was put in a position to assess their value" (our translation) (Cass. com., 26 February 2025, No. 23-18.119). The disagreement over the rate of write-down did not amount to withholding of information. This decision is unfavourable to the buyer who complained of insufficient information. For the company, it shows the value of tracing what was provided, on what date and in answer to which question. For the investor, it is a reminder to put requests in writing and to reserve its due diligence conclusions before signing.

Article 1112-2 of the Civil Code makes liable the party who uses or discloses, without authorisation, confidential data received during the talks. A confidentiality agreement supplements this provision by defining the protected information, its duration and its fate when the discussions end. The breach must still be provable. In a sale of a business, the Orléans court of appeal rejected the seller's claim, noting in particular that it identified no specific document transmitted in confidence. It held that, "Since it establishes no link between specific confidential information and the complaints it raises against the respondents" (our translation), the company failed to establish a breach of the agreement (CA Orléans, ch. com., 18 September 2025, No. 23/01684). The court also refused to read the agreement as a ban on hiring the seller's employees. This decision is unfavourable to the party that had provided its data. To avoid this result, the term sheet and the confidentiality agreement should provide for a dated list of the documents delivered, an obligation to return or destroy them and, if the parties wish, a separate clause on non-solicitation of staff.

The investor's economic and political rights are in practice fixed at the term sheet stage, because the definitive documents then carry them over. Article L. 228-11 of the French Commercial Code (Code de commerce) authorises the issue of preferred shares whose special rights are defined by the articles of association, with voting rights that may be adjusted, suspended or removed. This is the usual vehicle for liquidation preference, priority dividends or enhanced voting rights. Subscription warrants and convertible instruments fall under the rules on securities giving access to the share capital in Article L. 228-91. These rights are not frozen once created, but their amendment is regulated. Applying former Article 1134 of the Civil Code, the Court of Cassation holds that, where the articles of association of a simplified joint-stock company (SAS) do not provide for the procedure of amendment, "the individual consent of the holders of those shares is required to make such an amendment" (our translation) (Cass. com., 10 July 2024, No. 22-15.836). It also held that the holders of the shares whose rights were being modified could not take part in the vote, in application of Article L. 228-15, paragraph 2, which rendered the resolutions adopted null. That provision reserves the case where all the shares are converted into preferred shares. Once preferred shares have been created, amending their rights may therefore require the consent of each holder if the articles of association do not provide for such an amendment. At the term sheet stage, the possibility of going back on a negotiated term depends first on the binding force of the document.

The exit clauses announced in the term sheet, such as tag-along, drag-along or the alternative offer between shareholders, are carried over into the shareholders' agreement and sometimes into the articles of association. Their effectiveness depends in particular on the determination of the price and the precision of their triggering conditions. The sale price must be determined and designated by the parties, under Article 1591 of the Civil Code, and Article 1163 of the Civil Code requires a performance that is determined or determinable, without any new agreement of the parties. In a shareholders' agreement providing for an alternative offer clause in the event of deadlock, the Court of Cassation approved the court of appeal that had held that "the mechanism established by the alternative offer clause did not leave the setting of the price to the will of one party alone" (our translation) (Cass. com., 12 February 2025, No. 23-16.290). The sale became complete upon performance of the undertakings provided for in the agreement, and the appeal was dismissed. The term sheet must therefore describe precisely the triggering event, the price formula and the timetable, because the shareholders' agreement will be drafted on those terms. In an SAS, the articles of association may also make share transfers subject to approval, as permitted by Article L. 227-14 of the Commercial Code.

Term sheets and letters of intent to acquire often provide for conditions precedent: satisfactory due diligence, obtaining financing, approval by a third party or an authority. Article 1304-3 of the Civil Code deems a condition precedent fulfilled if the party with an interest in it has prevented its fulfilment. The Court of Cassation clarifies the scope of this sanction. It holds that "a condition precedent can be deemed fulfilled, within the meaning of Article 1304-3 of that Code, only as a sanction against the debtor who, being bound under that condition, has prevented its fulfilment" (our translation) (Cass. 3e civ., 24 September 2026, No. 24-16.732). Where it is the creditor who causes the failure, the condition is not deemed fulfilled, without prejudice to an action for compensation. The case concerned a property sale, but the rule rests on the general interpretation of the Civil Code and applies to any conditional obligation. In a term sheet, the party bearing each condition, the steps it must take and the date after which the condition fails should therefore be clearly designated.

The firm offers a preliminary review at €80 incl. VAT. It consists of examining the draft term sheet or letter of intent and the relevant documents provided, such as the articles of association, the existing shareholders' agreement and the cap table, in order to identify the nature of the document, the clauses that bind from signature and the economic points to discuss. This first analysis shows whether a full review, a written counter-proposal or support through to the definitive documents is worthwhile. The scope and cost of any further work are stated in writing before any commitment, depending on the size of the transaction, the number of versions to be negotiated and the number of parties. The preliminary review does not oblige you to entrust the rest of the matter to the firm. It is all the more useful the earlier it takes place: once the term sheet is signed and exclusivity has opened, the room for negotiation on valuation, special rights and governance narrows considerably, and some concessions become difficult to challenge in the definitive documents. Sending the draft before the reply deadline set by the investor or the acquirer leaves time for a full review and a reasoned counter-proposal.