Heads of Agreement in Australia: 2025 Guide & Legal Essentials

Signing a Heads of Agreement can feel like ticking the final box before a major deal. But what are you really committing to? In 2025, new legal interpretations and policy tweaks mean it’s more important than ever for Australians to understand these crucial documents before putting pen to paper.

What is a Heads of Agreement – and Why Does It Matter?

A Heads of Agreement (HoA) is a preliminary document that sets out the main terms of a proposed deal between two or more parties. In Australia, HoAs are commonly used in property transactions, business sales, joint ventures, and commercial leases. While not always legally binding, they signal a serious intent to proceed and often form the roadmap for a final contract.

• Clarity: Outlines key terms so everyone is on the same page early on.

• Negotiation Tool: Can help identify sticking points before expensive due diligence begins.

• Legal Ambiguity: Not all HoAs are created equal—some clauses can be enforceable in court.

For example, if you’re buying a commercial property in Sydney, an HoA might specify the agreed price, deposit, key dates, and any conditions (like finance or regulatory approval) before moving to a full contract of sale.

2025 Legal Landscape: What’s Changed for HoAs?

Recent court cases and updates from the Australian Competition and Consumer Commission (ACCC) in 2025 have highlighted the need for clear wording in HoAs. Here’s what’s new and what you need to watch for:

• Binding vs. Non-Binding: Courts now scrutinise whether parties intended to be bound by the HoA, focusing on the language used. Phrases like “subject to contract” or “non-binding” are crucial, but so is the conduct of parties after signing.

• Good Faith Obligations: Some states, including NSW and Victoria, are trialling reforms requiring parties to negotiate in good faith once a Heads of Agreement is signed. This could mean financial penalties for walking away without proper cause.

• Electronic Signatures: With the Electronic Transactions Act updated in 2025, digital signatures on HoAs are now fully enforceable nationwide, streamlining remote negotiations.

In a recent 2025 Federal Court case, a Melbourne tech startup and an investor clashed over an HoA that was labelled “non-binding”—but because both parties acted as if a deal was done, the court found parts of the agreement enforceable. The key lesson: substance often matters more than labels.

Risks, Traps, and How to Protect Yourself

While Heads of Agreement can speed up negotiations, they come with hidden risks. Here’s how to avoid common pitfalls in 2025:

• Be Specific: Clearly state which terms are binding (e.g., confidentiality, exclusivity) and which are not.

• Don’t Rely on Templates: Off-the-shelf documents may not reflect your intentions or current legal standards.

• Watch for ‘Pre-Contractual Liability’: If you walk away after signing an HoA, you could face claims for costs or damages, especially if you’ve acted in a way that suggests the deal was certain.

• Consider Tax Implications: In 2025, the ATO has flagged that certain HoAs may trigger stamp duty or GST liabilities if they go beyond mere “agreement to agree.”

Real-World Example: A Queensland mining company recently signed a Heads of Agreement to enter a joint venture. When commodity prices plummeted, they tried to exit. Because the HoA included a binding exclusivity period and due diligence cost sharing, they were forced to reimburse the other party and lost several months of negotiation time.

Making Your Heads of Agreement Work for You

So, how can you use a Heads of Agreement to your advantage in 2025?

• Use Clear, Unambiguous Language: Spell out which parts are binding and which aren’t.

• Limit the Scope: Only include key terms needed to progress negotiations.

• Allow for Flexibility: Build in review dates and conditions precedent, especially for complex deals.

• Get Professional Input Early: Engaging a legal or financial adviser before signing can save money—and stress—down the track.

Whether you’re buying a business, entering a partnership, or negotiating a major contract, a well-drafted Heads of Agreement can be a powerful tool. But in 2025’s legal environment, the days of “she’ll be right” are over—clarity and caution are king.