FAQS
Are Series A term sheets binding?
- Financing
- Preferred Stock
Almost all term sheets provide that they are not binding, except for certain provisions regarding exclusivity, confidentiality, and/or expenses, depending on the term sheet. An investor can refuse to complete the financing at any time if the term sheet isn’t binding. A company has very little practical recourse if a venture fund fails to complete a financing after signing a non-binding term sheet. However, there is a California case that held that a document intended to outline the terms of a proposed transaction may impose a duty to negotiate in good faith on the parties.
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