"Subject to contract" is a legal phrase that means an agreement is not yet legally binding. It indicates that the parties are still negotiating and nothing is final until formal contracts are signed.
This phrase is commonly used in property purchases, but it can also appear in other business agreements. It protects both parties by making it clear that nothing is agreed until contracts are exchanged.
What does it mean in practice?
When something is "subject to contract," it means:
- Not legally binding - Neither party is committed yet
- Still negotiating - Terms can still be changed
- No obligation - Either party can pull out without penalty
- Nothing agreed - Until formal contracts are signed
It's essentially a way of saying "we're discussing this, but nothing is final yet."
Why is it used?
"Subject to contract" is used to:
- Protect both parties - Prevents accidental binding agreements
- Allow negotiation - Gives time to agree on all terms
- Prevent misunderstandings - Makes it clear nothing is final
- Allow withdrawal - Either party can walk away without consequences
Without this phrase, casual discussions or written offers could potentially be legally binding, which neither party usually wants until everything is agreed.
When is it used in property?
In property purchases, "subject to contract" appears in:
- Offers to buy - When you make an offer on a property
- Acceptance of offers - When a seller accepts your offer
- Correspondence - Letters and emails between solicitors
- Draft agreements - Early versions of contracts
It's used throughout the buying process until exchange of contracts, when the sale becomes legally binding.
What happens after "subject to contract"?
After an offer is accepted "subject to contract," the process continues:
- Solicitors get involved - Both parties' solicitors start work
- Surveys are done - Buyer arranges surveys and searches
- Contracts are drafted - Solicitors prepare formal contracts
- Terms are negotiated - Any issues are discussed and resolved
- Contracts are exchanged - This is when it becomes legally binding
Until exchange of contracts, either party can still pull out without penalty (though you may lose money spent on surveys, searches, etc.).
Can I pull out if it's "subject to contract"?
Yes, if something is "subject to contract," you can pull out:
- Without penalty - You're not legally bound
- At any time - Until contracts are exchanged
- For any reason - Or no reason at all
However, you may lose:
- Survey costs - Money spent on surveys
- Solicitor fees - Fees for work already done
- Search costs - Money spent on searches
You won't lose your deposit (as you haven't paid one yet) or face legal action for pulling out.
What if it's not "subject to contract"?
If an agreement is not "subject to contract," it could be:
- Legally binding - Even if no formal contract is signed
- Enforceable - A court could enforce the agreement
- Risky - You might be committed before you're ready
This is why the phrase is so important - it protects you from accidentally committing to something.
Does it apply to other agreements?
"Subject to contract" can be used in:
- Business agreements - Commercial contracts
- Employment - Job offers (though less common)
- Services - Service agreements
- Any negotiation - Where parties want to protect themselves
The principle is the same - it means nothing is agreed until formal contracts are signed.
What about "subject to survey"?
"Subject to survey" is different:
- "Subject to contract" - Nothing is legally binding
- "Subject to survey" - Offer depends on survey results
You might see both phrases together, meaning the offer is not binding and depends on a satisfactory survey.
How do I protect myself?
To protect yourself:
- Use "subject to contract" - In all correspondence about property purchases
- Get it in writing - Make sure it's clear in emails and letters
- Don't commit - Don't do anything that suggests you're committed (like booking removals) until exchange
- Get legal advice - Your solicitor will ensure everything is properly worded
Your solicitor will handle this for you in a property purchase, but it's good to understand what it means.
Summary
- "Subject to contract" means an agreement is not yet legally binding
- It protects both parties by making it clear nothing is final until contracts are signed
- Commonly used in property purchases throughout the process until exchange
- Either party can pull out without legal penalty, though you may lose money spent on surveys/searches
- Without this phrase, agreements could potentially be legally binding
- Can be used in other business agreements too
- Different from "subject to survey" which means the offer depends on survey results
- Your solicitor will ensure proper wording, but it's important to understand what it means
- Don't commit to anything (like booking removals) until contracts are exchanged
