“David [Goldberg] confirmed that this was a firm offer with instructions from [Joanne] to make to [Moneything] and if accepted, that was the matter concluded, save that we still had to work out the mechanics of how the funds got released from the ring fenced sums.”
“It is everyday practice for a solicitor, who is instructed in a sale of land, to start the correspondence with a letter "subject to contract" setting out the terms or enclosing a draft. He does it in the confidence that it protects his client. It means that the client is not bound by what has taken place in conversation. The reason is that, for over a hundred years, the courts have held that the effect of the words "subject to contract" is that the matter remains in negotiation until a formal contract is executed.”
“As everybody, including Mr Christos himself, knows, that expression, when used in relation to the sale of land, means that, although the parties have reached an agreement, no legally binding contract comes into existence until the exchange of formal written contracts takes place.”
“The meaning of that phrase is well-known. What it means is that (a) neither party intends to be bound either in law or in equity unless and until a formal contract is made; and (b) that each party reserves the right to withdraw until such time as a binding contract is made.”
“But there is this overwhelming point: Everything in the opening letter was “subject to contract.”
“parties could get rid of the qualification of ‘subject to contract’ only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied.”
“… when parties started their negotiations under the umbrella of the “subject to contract” formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged.”
“Accordingly, in my judgment, the judge, with great respect, fell into the error which was adumbrated by Brightman J, namely of thinking that because parties got near a contract or conveyance, because parties assumed that they would go happily on until matters had become binding, therefore the “subject to contract” qualification either ceased to have effect or was replaced by a new contract. That, in my judgment, is not the position. It is always the case that in “subject to contract” negotiations one side or both from time to time speak as though there was a contract or would be a contract, and that is because everybody looks on the bright side and thinks a sale is going to take place. The fact of the matter is that for very good reasons the “subject to contract” formula enables one to see at once whether there is or is not a contract—either a contract exchanged or conveyance executed and delivered—or whether parties are in the negotiation stage. Once one gets away from principle, then all is difficulty, and reliance on odd conversations and letters produces uncertainty in law.”
“We agree … that, in a case where a contract is being negotiated subject to contract and work begins before the formal contract is executed, it cannot be said that there will always or even usually be a contract on the terms that were agreed subject to contract. That would be too simplistic and dogmatic an approach. The court should not impose binding contracts on the parties which they have not reached. All will depend upon the circumstances.”
“Whether in such a case the parties agreed to enter into a binding contract, waiving reliance on the “subject to [written] contract” term or understanding will again depend upon all the circumstances of the case, although the cases show that the court will not lightly so hold.”