One of the terms that gets bandied around during negotiations is “subject to contract”. Unlike some well-worn phrases, it does carry a particular meaning and has a particular effect – but this is sometimes forgotten. The courts have given us a useful recent reminder of when it applies, the consequences of using it, and how to revoke it.

In order for a binding contract to be created, one of the key requirements is that the parties must have intended to create legal relations. Generally, this requirement is easily satisfied. However, using the term “subject to contract” can mean that the parties are still in negotiations and that they do not intend to create legal relations – and in that event no binding contract is created.

The term was recently considered by the Court of Appeal in Joanne Properties Ltd vs Moneything Capital Ltd and Moneything (Security Trustee) Ltd [2020] EWCA Civ 1541.

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