A term sheet lays the groundwork for ensuring that the parties involved in a business transaction are in agreement on most major aspects of the deal, thereby precluding the possibility of a misunderstanding. It also ensures that expensive legal charges involved in drawing up a binding agreement or contract are not incurred prematurely.
They generally cover the more important aspects of a deal, without going into every minor detail and contingency covered by a binding contract. For example, a term sheet from a venture capital company that is investing in an early-stage company may contain such details as the amount of investment, the percentage stake sought, anti-dilutive provisions and valuation.