Bombay High Court on ‘Term Sheets’ & ‘Long Stop Dates’

Ref: M/s Everhome Properties Pvt. Ltd. v. M/s Aditya Developers & Ors.

What was the issue?

The parties had signed a Term Sheet for a real estate transaction. The Term Sheet clearly mentioned a Validity / Long Stop Date, by which certain conditions had to be fulfilled and definitive documents executed. That date passed without completion or any written extension.

What did the Court hold?

1. A Long Stop Date is not a formality, it has real legal consequences. A term sheet with a specific validity or long stop date cannot survive beyond that date unless expressly extended.

2. Once the long stop date expires, the term sheet automatically comes to an end.

3. Such a term sheet, which is subject to conditions and future definitive agreements, cannot be treated as a binding, enforceable contract.

4. Post-expiry emails or draft agreements cannot revive a lapsed term sheet unless the parties expressly extend it.

The Court upheld the lower court’s order and dismissed the appeal.

Why does this matter?

Many deals move ahead casually on the assumption that a ‘term sheet is good enough’. This judgment is a reminder that:

1. Term Sheets are only as strong as their clauses.

2. Validity periods and conditions precedent must be tracked seriously.

3. If time needs extension, it should be clearly documented. Silence can be fatal to the deal.

Key takeaway: If your agreement has a Long Stop Date, treat it like a deadline not a guideline.