It may sometimes be interpreted by a court of law as binding the parties to it if it too-closely resembles a formal contract and does not contain a clear disclaimer.
In SIGA Technologies v. PharmAthene, Inc.,[2] the Delaware Supreme Court held that, where a party to a detailed term sheet breaches its duty to negotiate in good faith, the other party may be entitled to an award of damages for the loss of the so-called "benefit of the bargain" being negotiated.
Experienced counsel immediately know generally what is meant when the term sheet specifies "one demand registration at the issuer's expense, unlimited piggybacks at the issuer's expense, weighted average antidilution"; it saves time not to have to spell out the long-form edition of those references.
Second, since the term sheet does not propose to be an agreement of any sort, it is less likely that a court will find unexpected promissory content; a "letter of intent" can be a dangerous document unless it specifies very clearly, as it should, which portions are meant to be binding and which merely guide the discussion and drafting.
The summary format of a term sheet, however, makes it less likely that any party will be misled into thinking that some form of enforceable agreement has been memorialized when it has not.