Contractual Terms in English Law - "Subject To" Contracts

"Subject To" Contracts

If a contract specifies "subject to contract", it may fall into one of three categories:

1. The parties are immediately bound to the bargain, but they intend to restate the deal in a formalised contract that will not have a different effect; or
2. The parties have completely agreed to the terms, but have made the execution of some terms in the contract conditional on the creation of a formalised contract; or
3. It is merely an agreement to agree, and the deal will not be concluded until the formalised contract has been drawn up.

If a contract specifies "subject to finance", it imposes obligations on the purchaser:

• The purchaser must seek finance; and
• When offers of finance arrive, the purchaser must make a decision as to whether the offers of finance are suitable.

This may also refer to contingent conditions, which come under two categories: condition precedent and condition subsequent. Conditions precedent are conditions that have to be complied with before performance of a contract With conditions subsequent, parties have to perform until the condition is not met. Failure of a condition repudiates the contract this is not to necessarily discharge it. Repudiation will always gives rise to an action for damages.