The terms of a TLD sale, explained line by line

A TLD sale can collapse for reasons that have nothing to do with price. The token is not in the wallet the seller named. Names were issued after the term sheet was signed. The buyer did not disclose that it cannot transact without board approval. The asset on offer turned out to be narrower than the buyer assumed. Every one of those failures is traceable to a term that neither side discussed early enough.

This article walks through the terms of a TLD sale in the order they tend to appear in a term sheet, explains the purpose of each one, and names the questions worth raising before you sign anything. It is addressed equally to a holder who has received an offer and to a buyer who has been shown a TLD and wants to understand what they are committing to. It is information, not legal advice; your own counsel makes the final call.

By the end you will be able to read a term sheet for an onchain TLD and know which lines to probe, which declarations to verify against the registry record, and what to settle about closing before the day arrives.

The asset: what is actually being transferred

An onchain TLD is a token held in a wallet. On Freename, for example, the TLD is recorded onchain as a token, and the holder is whoever controls the wallet in which it sits. Because that record is public and anyone can check it on a block explorer, it is also the starting point for the asset definition in any sale.

The asset line should name the TLD exactly as it appears in the registry, identify the wallet from which it will be sent, and state what else is included. “What else” is where disputes commonly begin.

A bare TLD sale transfers the token and nothing beyond it. But a TLD may come with associated materials: technical documentation for the namespace, a policy for issuing names, a visual identity created for the namespace, or a relationship with an operator who runs a market under the TLD. Whether any of those items travels with the token depends entirely on what the asset line says. If it is silent, each side will argue from its own assumption.

The line should also say what is excluded. If the seller runs a website at a name under the TLD, does that site stay where it is after the transfer, and who controls it? If there are names already issued under the TLD, what becomes of them? Because only the holder can issue names under a Freename TLD, any names already registered under it exist because the seller issued them or allowed them to be issued. The buyer is acquiring the TLD, and the names the seller itself holds under it can be transferred with it by agreement, so they come only if the terms say so. Names held by third parties are a separate matter again: they belong to the people who registered them, and the buyer inherits a namespace that is already partly occupied.

That is why the count of names issued, and who holds them, belongs in the asset line and not in a later conversation. An adviser acting for a buyer can compare what the seller states with what the public record shows, and ask about every difference. A TLD with no names under it and a TLD with an active namespace are different assets, even when the string is the same length and the price is the same number.

For buyers who want to understand what a TLD can be used for once it is theirs, the page on what is live lists each working capability with its source.

Price and the asset in which it is paid

Price terms for a TLD sale have two components: the amount and the denomination.

Denomination matters more in an onchain transaction than in a conventional domain sale, because payment may be expected in a crypto asset and not in a national currency. That introduces a question of timing. If the agreed price is a fixed amount of a volatile asset, the real value of the payment depends on when it is made. The term sheet can name a fixed amount in a national currency that the crypto amount will track, with the conversion date and the source of the rate, or it can state a fixed quantity of a specific token with no currency anchor. Each approach allocates exchange-rate risk differently, and both sides should be explicit about which one applies.

A second question hides inside denomination: which asset exactly, and on which network. A token of the same name can exist on more than one blockchain, and a payment sent in the wrong form is at best a delay. A term sheet that names the asset and the network leaves nothing to interpret on the day.

Payment structure is separate from denomination. A single payment at closing is the simplest structure, and the one that fits an exchange through onchain escrow. Deferred or installment structures are possible, but part of the price is then owed after the token has moved, which leaves the seller exposed to the buyer’s later performance. If any portion of the price is deferred, the term sheet needs to say what secures the seller’s right to that future payment.

Royalties are a pricing consideration that is sometimes missed. Freename runs a royalty program under which a TLD holder is paid a share of the registration fee on each name registered under the TLD; the registry advertises that share at up to half, and it depends on the registry’s current terms and on activation conditions. If third parties are registering names under the TLD, that revenue may have value. It does not come free: a Freename TLD has no annual renewal fee, but taking part in the program carries an annual cost set by the registry. The buyer should confirm with the registry how the program applies to a new holder, whether any step is needed after the transfer, and, where the seller registered under earlier terms that include the program for life, whether those terms pass to a buyer. The asset line and the price line should agree on the answer.

Tax sits behind the price as well. How a sale of this kind is treated, and whether payment in a crypto asset changes that treatment, varies by country and by the status of each party. The term sheet does not settle it; each side’s own adviser does.

Validity: until when the terms stand

Every term sheet expires. The validity line states the date on which the terms lapse if the parties have not signed a full agreement or reached closing.

The validity date does several things at once. It gives the negotiation a horizon. It prevents a buyer from tying up a seller’s TLD indefinitely on an expression of interest. And it sets the outer limit of any commitment by the seller not to talk to others, if one exists.

Whether a term sheet binds at all before a full agreement is signed is a separate question. Many are written as non-binding, apart from a few lines stated to be binding, such as confidentiality or exclusivity. How far that intention holds depends on the wording and on the law that governs the document, and it differs from one country to another. This is a point for your counsel, and it is worth asking before you sign and not after a counterparty walks away.

When reviewing a validity line, the first question is whether the date is realistic given the review and signing process on each side. A period that is too short pushes a party to sign before its checks are complete. A period that is too long lets a file drift, and leaves the seller unable to plan. An organization that needs a committee to approve the purchase knows roughly how long that takes; the validity date should reflect it, and the seller is entitled to know that the approval is pending.

Both sides should also check whether the line works the same way for each of them. Does it lapse for both parties on the same date, or does one side keep an option after the other’s commitments have ended? And what does it take to extend: a written confirmation from both sides, or the silence of one? A validity line that can be extended by silence is not really a validity line.

The transfer of a token is quick compared with the completion of a conventional acquisition, but the checks, approvals and wallet preparation around it take the time they take. Your own adviser will judge what period suits the specific file.

What the seller declares about the TLD

Seller declarations, which lawyers often call representations, are the seller’s formal statements about the current state of the asset. Each one allocates risk: if a statement turns out to be false, the buyer may have a claim, on the conditions set by the agreement and the law that governs it.

The core declarations in a TLD sale cover the following ground.

Ownership and authority. The seller holds the TLD, has the right to transfer it, and has obtained any internal approvals required to do so. For an onchain TLD, the holder is the wallet in which the token sits. A buyer’s adviser can check that wallet against the public registry record before signing, not after.

Freedom from encumbrances. The TLD is not pledged as security, is not the subject of a dispute or pending claim, and is not subject to any agreement that would restrict its transfer. This is particularly important where the TLD has been used commercially: a TLD that has been licensed to an operator, or that has names registered under it, may carry obligations that the transfer of the token does not extinguish.

Absence of proceedings. There are no active or threatened proceedings relating to the TLD, intellectual property disputes included. The UDRP, the Uniform Domain Name Dispute Resolution Policy, is the administrative procedure that registrants of domain names in the ICANN system accept through their registration agreements. Onchain TLDs sit outside that system, so the policy does not reach them. That does not put an onchain TLD beyond dispute. A trademark owner may still go to a court and argue that a use of the TLD infringes its rights, and the outcome depends on the country and the facts. The seller’s declaration should cover both formal proceedings and any written complaint received.

Accuracy of information. Everything the seller has provided to the buyer during the negotiation accurately represents the TLD’s status, its history of issued names and its technical configuration.

Each declaration is only as strong as the knowledge behind it. A seller who declares something “to the seller’s knowledge” is giving a narrower promise than one who declares it as fact. Buyers should understand that distinction before accepting a draft, and may ask for the broader form where an unknown encumbrance would matter most.

A seller has an interest in these lines too. A declaration you cannot stand behind is better narrowed in the draft than discovered later. If an operator has an arrangement under the TLD, or a complaint once arrived and went quiet, saying so in the terms turns a possible claim into a known fact that the price already reflects.

What the buyer declares

Buyer declarations receive less attention than the seller’s, but they carry real consequences if false.

Authority. The buyer has the right and authority to enter into the agreement and has obtained all internal approvals required. For a corporate buyer, this means the approval of the board or of an investment committee where the purchase falls within the decisions that require it. A buyer that signs without proper internal authority leaves the seller with an agreement that may be challenged later, depending on the law that applies. If the buyer is an individual acting through a wallet they control personally, authority is usually straightforward; if the buyer is a legal entity, the seller can reasonably ask who signs and on what basis.

Source of funds. A buyer may be asked to state that the funds used to pay the price come from a legitimate source. This is not universal in TLD sales. It tends to appear when the price is paid in a crypto asset and one party operates in a regulated environment, where its own compliance rules require the question to be asked. What those rules demand varies by country and by sector.

Capacity to close. The buyer has, or will have, the funds and the technical means to receive the TLD at closing. A buyer who has not prepared a receiving wallet, or who does not have the price available in the agreed denomination on the closing date, is in breach and may trigger the break provisions. Confirming these practical details before signing is simpler than remedying a failed closing.

Intended use. Some term sheets include a buyer declaration about intended use, particularly where the seller has an interest in the TLD being used consistently with an established namespace. Whether this is appropriate depends on the nature of the TLD and the negotiation.

One practical point belongs here although it is not strictly a declaration: who the buyer is. A buyer may act through an adviser or an intermediary during the talks. The terms should make clear which legal entity will sign the full agreement and which wallet will receive the token, so that the seller knows who gives the declarations above.

Interim conduct: the period between signing and closing

Between signing and closing, both parties remain bound by obligations that govern how they behave toward the TLD and toward third parties.

The central obligation on the seller is to take no action that would change the state of the asset in a way the buyer has not agreed to. In an onchain TLD sale, this typically means: do not issue new names under the TLD; do not transfer or pledge the token; do not enter into any new license or operator arrangement; and do not take any action that would provoke or escalate a third-party claim. This list is specific to the asset, and your counsel may extend it depending on what the checks have revealed.

The line on issuing names deserves a second look, because it cuts both ways. A buyer wants the namespace frozen in the state it examined. A seller who runs a live namespace, with third parties registering names in the ordinary course, cannot always freeze it without harming the asset being sold. The terms can distinguish between the two: no names issued by the seller for itself or for its associates, while ordinary registrations by the public continue under the existing policy. What matters is that the buyer knows which regime applies and can compare the record at closing with the record at signing.

The second question is whether the seller may talk to anyone else. An exclusivity commitment, sometimes called a no-shop, asks the seller to halt discussions with other potential buyers until the validity date. Terms may include it or leave it out, and both positions are legitimate. If it is there, check whether it is stated to be binding and what follows if it is not respected. An exclusivity line with no consequence attached gives the buyer little. One with a defined consequence gives the buyer real protection during the period it needs to complete its checks and sign a full agreement. If it is absent, the buyer should assume that other conversations are possible and plan its timetable accordingly.

The buyer’s interim obligations are narrower. The principal one is confidentiality: the buyer does not disclose the existence or terms of the transaction to third parties before closing. For a corporate buyer, this extends to the employees and advisers who receive information about the transaction. On a file handled by Hush Partners, a standard mutual NDA applies to all exchanges, so that baseline exists before any terms are shared.

Closing: where it happens and who bears which cost

Closing is the moment at which the token moves to the buyer’s wallet and the price moves to the seller. Neither side wants to move first without certainty that the other will follow. That is the purpose of onchain escrow on an aftermarket: the exchange is carried out by the venue’s own mechanism, not by one party trusting the other.

The closing line of the terms should therefore name the aftermarket. On files handled by Hush Partners, escrow and transfer run on Freename’s aftermarket unless the client would rather use another marketplace, OpenSea being one example. The choice matters because each venue has its own rules and its own costs, and both parties should read those rules before the day, not during it.

1. Confirm the walletsBoth parties confirm the wallet that holds the TLD and the wallet that will receive it, against the public registry record and against the agreement. Any discrepancy is resolved before anything else happens.
2. Recheck the declarationsEach side confirms that what it declared is still true: no new proceedings, no new arrangement over the TLD, approvals in place, funds available in the agreed denomination.
3. Compare the namespaceThe buyer compares the names issued under the TLD with the position stated in the terms, so that any breach of interim conduct is seen before closing and not after.
4. Close through escrowThe exchange runs through onchain escrow on the aftermarket named in the terms, under that venue's rules.
5. Verify and hand overThe buyer checks on a block explorer that the registry record now shows its wallet. Any agreed handover, such as technical documentation, follows.

Cost allocation at closing is negotiable. The costs charged by the aftermarket, network fees (the transaction costs charged by the underlying blockchain) and the fees of each party’s advisers all need a designated payer in the agreement. There is no single convention to rely on. Each party often carries its own advisers’ fees, and the remaining costs go wherever the terms put them. If the terms are silent, the venue’s default applies, which may not be what either side assumed.

Where a desk acts in the sale, its fee is one more cost to place. At Hush Partners the fee is a fixed amount and not a percentage, and it is charged only to the client who gave the mandate. The other party pays the price of the TLD and no fee to the desk.

Timing is part of closing too. The agreement should state a closing date or a way of determining it, such as a set number of business days after the last condition is met. An open-ended timetable creates uncertainty and, if the validity period is short, risks the terms lapsing before closing occurs.

Confidentiality after closing

Post-closing confidentiality governs what each party may say about the transaction once the token has moved.

A common position is that the existence and terms of the sale remain confidential unless both parties agree otherwise. This matters for several reasons. The price becomes a reference point for future valuations of similar TLDs, and a seller may not want that reference public. The buyer’s identity, and the intent behind the acquisition, may be commercially sensitive. A seller who has agreed not to name the buyer cannot later use the transaction as a credential without breaching that commitment.

The line should specify its duration. Confidentiality without an end date is sometimes agreed, but it becomes harder to enforce as time passes and the information loses its sensitivity. A defined period is the usual alternative, and its length is a matter for negotiation.

Exceptions are standard: each party is usually permitted to disclose the transaction to its own legal and tax advisers, to comply with a legal requirement or a court order, and to make any disclosure a regulator requires. The exception for regulatory disclosure is particularly relevant for corporate buyers in regulated industries, and for any party whose accounts are audited.

The onchain character of the transaction adds one specific point. The transfer of the token is visible: anyone who looks at the registry record can see that the wallet holding the TLD has changed. What stays private is the identity behind each wallet, the price and the terms. The agreement should be written with that distinction in mind, so that neither party is in breach merely because the public record shows a transfer. A buyer for whom discretion matters should think about which wallet receives the TLD before closing, since that wallet’s history is as public as the transfer itself.

What happens if closing does not occur

Break provisions address the case in which the agreement is signed but closing never happens. They are among the most consequential terms in any sale agreement and among those most often left thin.

The first question is what triggers a break: a missed closing date, a false declaration that cannot be cured, a breach of interim conduct, a condition that fails through no fault of either party, or some combination. Each trigger may have a different consequence, and the agreement should be specific.

Where the seller is at fault (the token has been pledged, a declaration was false, or the seller refuses to perform), the buyer’s minimum remedy is the return of anything it has already paid. Beyond that, the agreement or the governing law may give the buyer a right to damages, or to specific performance, meaning a court order requiring the seller to complete the transfer. Courts in some countries grant that remedy more readily where the asset cannot be replaced, and a given TLD is the only one of its string in its registry. Whether it is available to you, and whether an order could be enforced in practice against the holder of a wallet, is a question for your counsel.

Where the buyer is at fault (funds not available, authority not obtained, wallet not prepared), the seller’s minimum remedy is release from the agreement and the freedom to deal with another buyer. A seller who has respected an exclusivity commitment has borne a real cost. A break fee paid by the defaulting buyer, where the terms provide one, recognizes that cost.

Where neither party is at fault, the provision should give a clean exit: the agreement ends, anything already paid is returned, and neither side owes the other. This case is less likely in a TLD sale than in an acquisition that depends on outside approvals or financing, but it is not impossible.

The agreement should also say what becomes of confidentiality, the declarations and any exclusivity after a break. Confidentiality is usually written to survive. Whether the declarations survive for the purpose of a claim is a point for your counsel.

Reading your own terms before you answer

Take the terms you have been sent, or the ones you are about to send, and set them against the table at the top of this article. Mark each of the nine lines as agreed, open or silent. The silent ones are the ones to raise first, because a silent line is where each side is relying on its own assumption. Then give the marked copy to your counsel, who decides what the final wording needs to be.

If you hold a TLD and have no buyer yet, a sell-side mandate asks the desk to find one, and a single named partner follows the file from the first note through to closing. A holder who wants a figure before discussing any terms can request a private valuation. If your organization has identified a TLD it wants, a buy-side acquisition mandate has the desk find the holder and make the approach. Lawyers and advisers who refer a client’s file will find the page for advisors written for them, and the stages a file goes through, from mandate to transfer, are set out under how it works.

After closing, the work changes character. Post-transfer activation covers putting the TLD to use under its new holder.

Questions people ask

Can a TLD sale be completed using only the aftermarket escrow, with no written terms?

Escrow on an aftermarket deals with the exchange of token and payment. It does not deal with declarations, interim conduct, confidentiality or break provisions. A sale completed through escrow alone leaves both parties with little to rely on if the TLD turns out to be encumbered, if the seller issued names shortly before closing, or if the buyer’s identity needed protecting. Escrow is one component of a closing, not a substitute for agreed terms.

What governs an onchain TLD sale when the parties are in different countries?

A line on governing law and dispute resolution, which this article does not examine in detail, states which country’s law applies and where disputes are heard. The parties should agree on it before signing, since the answer affects which remedies are available and how quickly a court can be reached. Your counsel decides what suits your situation.

If the registry record changes after signing but before closing, what happens?

The interim conduct obligation that bars the seller from transferring or pledging the token is the line that addresses this. If the record changes in breach of it, the buyer’s remedies are those the agreement provides. If the change has a cause outside either party’s control, the no-fault break provision applies. Checking the registry record immediately before closing, and not only at signing, is a safeguard that costs nothing.

Does the royalty program on a Freename TLD pass to the new holder with the token?

The program runs in favor of the holder of the TLD and is subject to the registry’s current terms and activation conditions. Whether a new holder steps into it directly or has to activate it is a point to confirm with the registry and to record in the asset line. Ask at the same time about the annual cost of taking part, and whether lifetime terms granted to the seller, if any, follow the token. Do not assume either answer. Confirm it before the price is agreed, because royalty revenue may be part of what the buyer believes it is paying for.

What is the difference between a term sheet and a full sale agreement?

A term sheet records the principal commercial terms: asset, price, validity, and sometimes exclusivity and confidentiality. A full sale agreement sets out all the terms in a form meant to be enforced, including declarations, closing conditions and break provisions. The term sheet is the foundation for the full agreement. Whether a sale should close on a term sheet alone is for your counsel to say; the lines discussed above are the ones a term sheet most often leaves out.