Glossary
Subject to contract
"subject to contract"Subject to contract" means the parties do not intend to be bound until a formal contract is signed. The label is strong but not magic. If they act as if they have a deal and leave no essential term open, a court can still find a contract: RTS Flexible Systems Ltd v Molkerei Alois Müller [2010] UKSC 14.More in the glossary" means the parties do not intend to be bound until a formal contract is signed. The label is strong but not magic. If they act as if they have a deal and leave no essential term open, a court can still find a contract: RTS Flexible Systems Ltd v Molkerei Alois Müller [2010] UKSC 14.
Last updated 28 October 2026
The phrase is how English commercial talks stay talks. It rebuts the presumption of intention to create legal relations while the paper is in draft. Winn v Bull (1877) 7 Ch D 29 is the old illustration. RTS Flexible Systems is the modern warning: if you perform the whole deal, drop “subject to contract” in later emails, and leave no term open, you may already be bound.
We put the words on the draft and we do not take a deposit against a paper that still says it. Lex keeps the shared page in draft until both sides e-sign. Starting the work, issuing the first invoice, or telling the client “we’re on” is how the label falls off.
Can we still end up bound?
Yes. RTS Flexible Systems [2010] UKSC 14: the parties had a draft, performed, and the essential terms were agreed. The Supreme Court found a contract. The words “subject to contract” are evidence of intention, not a spell. If you want them to hold, do not perform as if they were gone.
Should every email say subject to contract?
The emails that negotiate price, scope and dates should. The emails that only book a call need not. A footer on every message is weaker than a line at the top of the draft and the heads of terms. Once you sign, stop using the words — they confuse the executed version.
How is it different from heads of terms?
Heads of terms can bind selected clauses and leave the rest subject to contract. The label on its own is a blanket. If confidentialityConfidentiality is a promise to keep shared information private and to use it only for the agreed purpose.More in the glossary or exclusivity must bind now, say those clauses bind and the rest does not. A single stamp across the whole note will not save a clause you needed yesterday.
Does taking a deposit break the label?
It is strong evidence you intended a deal. Money changing hands, plus agreed scope and dates, is how RTS-type facts are built. If the depositA deposit is money paid up front, before the main work or the final invoice.More in the glossary is only a holding fee while the paper is finished, write that it is refundable until signature and is not acceptance.
A worked example
A studio and a client exchange a scoped proposal marked “subject to contract” and a start date of 10 May. On 4 May the studio starts the build and the client pays 30%. Later emails drop the label. In June they fall out over IP. A court can find they already had a contract on the terms they were performing, following RTS. The clean path was: sign the shared paper on 3 May, then start, then take the deposit.
How it shows up in a contract
Sample wording · our own drafting
This document is subject to contract and does not create legal relations. No contract exists until both parties have signed a version of the agreement. Starting discussions, circulating a draft, or reserving a date is not acceptance. A deposit paid before signature is a holding sum and is refundable until that signature.
In Plain English
This is not the contract yet. It becomes one when you both sign. Talking, sending a draft or holding a date is not a yes. A deposit before signature is only a hold and comes back if you never sign.
Common mistakes
- Marking a paper “subject to contract” and then performing the whole job.
- Taking a non-refundable deposit while the draft still says it is not a contract.
- Leaving the words on the executed version.
- Using one blanket stamp when heads of terms needed selected clauses to bind now.
Frequently asked questions
What does subject to contract mean?
That the parties do not intend to be bound until a formal contract is signed. The label is strong evidence, not a spell.
Can we still end up bound?
Yes. If you perform and leave no essential term open, a court can find a contract: RTS Flexible Systems [2010] UKSC 14.
Should every email say subject to contract?
The emails that negotiate the deal should. A footer on every message is weaker than a line on the draft. Stop using the words once you have signed.
How is it different from heads of termsHeads of terms are a short commercial outline of a deal the parties intend to write up as a full contract. In England and Wales they bind only if the parties intend that. They are often marked subject to contract, and they do the same job as a letter of intent under another name.More in the glossary?
Heads of terms can bind selected clauses now. “Subject to contract” is a blanket over the talks. See /glossary/heads-of-terms.
Related
The legal wording governsLast reviewed 28 October 2026Pending lawyer review