Subject to Contract in UK Law

But it is not, in my judgment, necessary that the note or memorandum should acknowledge the existence of a contract.

Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations.

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. It follows, therefore, that in negotiating on that basis both Generator and Lidl took the commercial risk that one or other of them might back out of the proposed transaction. In short, a “subject to contract” agreement is no agreement at all.

I do not say that the phrase makes the contract containing it necessarily and whatever the context a conditional contract. But they are words appropriate for introducing a condition, and it would require a very strong and exceptional case for this clear prima facie meaning to be displaced" In my view the facts of the Michael Richards case were very strong and exceptional.

The fact that a draft contractual document or a covering letter to it invites a party to initial or sign a copy and return it to the other party, or contemplates that a party would obtain legal advice before signing are telling indications that the parties do not intend to be bound until the document is signed: Investec Bank (UK) Ltd v Zulman [2010] EWCA Civ. 536 at [19–20].

Such a claim is in the nature of a quasi-contractual claim. For instance, if the negotiations between the vendor and the purchaser have been duly concluded and a binding executory agreement has been achieved, different considerations may arise. I think as at present advised that it ought then to be held that he is also in breach of his contract with the commission agent, that is, of some term which can properly be implied.

When examined in that way, Mr Cobbe's case seems to me to fail on the simple but fundamental point that, as persons experienced in the property world, both parties knew that there was no legally binding contract, and that either was therefore free to discontinue the negotiations without legal liability'that is liability in equity as well as at law, to echo the words of Lord Cranworth quoted in para 53 above.