Subject to Contract: Understanding the Legalese

If you’ve ever been involved in a business deal or a property transaction, you must have come across the term “subject to contract”. While it might sound like a straightforward phrase, it’s actually a legal term that holds significant importance. As a professional, I’ll guide you through the meaning of “subject to contract” and its implications.

Meaning of “Subject to Contract”

“Subject to contract” is a term used in legal contracts, including business deals, property transactions, and employment agreements. The phrase indicates that the parties’ negotiations are not yet binding and that the document is not a legally binding contract. It means that the parties have not yet agreed to the terms and conditions of the contract, and the deal is still in the negotiation phase.

Implications of “Subject to Contract”

The use of “subject to contract” has significant implications for both parties involved in the negotiation. It means that either party can walk away from the negotiation at any time, without any legal obligation to the other party. Additionally, it also means that neither party can take any legal action against the other if the negotiation breaks down before the contract is signed.

For instance, if two parties are negotiating a property sale, and they reach an agreement on the price and other terms of the sale, they can still walk away from the deal if the contract is only “subject to contract”. While it might be frustrating for one party, it’s a means to protect either party from being legally bound to a contract that they may later regret.

“Subject to Contract” in Employment Agreements

The use of “subject to contract” is also common in employment agreements. This is because the terms and conditions of employment might evolve over time, and it’s important to ensure that both parties have the flexibility to negotiate favorable terms. Typically, the employment offer letter is made “subject to contract”, meaning that the employment is not official until both parties sign the formal employment contract.

In conclusion, the term “subject to contract” should not be taken for granted. It’s a legal phrase that indicates that a negotiation is not yet finalized and can still change. As a professional, I highly recommend that you consult a legal expert before signing a contract, especially if it is not yet binding and is still “subject to contract”.