What Does ‘Subject to Contract’ Mean?

Subject to contract usually means the parties do not intend a proposed deal to become legally binding until a formal contract has been agreed.

Lowdown

The phrase is used during negotiations to show that the parties do not intend to be legally bound by the proposed deal at that stage. Government guidance describes negotiations that remain subject to contract as non-binding.^[1][3]

Why It Matters

This is common in heads of terms, where the broad deal is recorded before the full contract is completed.

Do not assume every part of a document is non-binding. IPO model heads of terms show that the main deal can be non-binding while clauses such as confidentiality, costs or governing law are made binding separately.^[2]

If you need certainty before starting work, spending money or turning down other opportunities, check which terms are already binding and whether the final contract has been agreed.

Our Conclusion

Subject to contract is a strong indication that the proposed deal is not yet binding, but read the whole document. Some individual clauses may still be intended to take effect immediately.

Sources

[1] HMRC, Capital Gains Manual: Delayed written contracts

[2] Intellectual Property Office, University and business collaboration agreements: Model heads of terms agreements

[3] Valuation Office Agency, Land Compensation Manual: Negotiations subject to contract and without prejudice