Subject to contract: deal or no deal?

Baltimore Wharf SLP -v- Ballymore Properties Ltd [2026] EWHC 312 (TCC)

This dispute makes clear that where negotiations begin 'subject to contract', that qualification ordinarily continues to govern the parties’ exchanges, so that subsequent negotiations remain subject to the same overriding condition.

Shipping lawyers would call this a 'subject' (or 'sub'), for example sub details, sub-BOD/management approval, sub stem, subject to survey. Each of these terms typically postpones any binding commitment until the 'subject' is lifted; only clear words, decisive conduct, or an agreed waiver or election turns a provisional understanding into a contract.

The same dynamic plays out in shipbuilding and off‑shore projects (for example 'subject to satisfactory survey' or 'board approval') and in day‑to‑day commercial deals marked 'STC', where conditionality controls until it is plainly satisfied, waived, or displaced by unequivocal conduct showing an intention to be bound.

Parties can get rid of that 'subject to contract' qualification only if they both expressly agree that it should be expunged or if such an agreement is to be necessarily implied.

Ultimately, whether the parties have agreed to enter into a binding contract waiving reliance on the 'subject to [written] contract' term or understanding will depend on all the circumstances of the case.

The background facts

The judgment does not set out much detail regarding the parties and the underlying claim. Essentially, however, the claimant, Baltimore Wharf SLP, alleged that the roof of a nursery at Baltimore Wharf, London (a residential development), had collapsed due to the defendant property developer’s breach of a collateral warranty and/or negligence. The defendant, Ballymore Properties Ltd, brought a Part 20 claim against a third party, WSP Ltd, an engineering and professional services firm. The damages claimed were over £2 million.

Both the defendant and the Third Party sought to have the claimant’s claim struck out on the grounds that the proceedings between the parties had been settled. The background to that contention was as follows:

On 30 July 2024, the Third Party had made the defendant an offer that was labelled 'without prejudice save as to costs and subject to settlement agreement.' The Part 20 proceedings were then stayed by consent until 1 October 2024.

Thereafter followed discussions and negotiations between the parties. On 29 August 2024, the defendant’s solicitors wrote to the other parties on a 'without prejudice save as to costs and subject to contract' basis. Their email attached a draft settlement agreement, which was also headed 'subject to contract and without prejudice save as to costs.' The draft agreement provided that it could be executed in any number of counterparts but that no counterpart would be effective until each party had transmitted to the others at least one executed counterpart.

On 10 September 2024, the Third Party’s solicitor sent back comments on the draft agreement, taking into account their offer to the defendant. Correspondence went back and forth with the defendant’s solicitor as to proposed amendments to the draft Settlement Agreement. All this correspondence was marked 'subject to contract and without prejudice save as to costs'.

On 24 September 2024, at 9.51 am, after the Third Party had accepted the defendant’s amendments, the defendant’s solicitor emailed all parties asking for confirmation that agreement had been reached. The claimant’s solicitor confirmed five minutes later, at 9.56 am, that agreement on the basis of the Third Party’s amendments had been reached. The defendant’s solicitor then asked for the claimant’s bank details so that they could be inserted into the final Settlement Agreement. Up till this point, all the correspondence, and versions of the draft Agreement, remained labelled 'without prejudice save as to costs and subject to contract'. An execution version of the Settlement Agreement was then circulated for signature. This version of the Agreement was not labelled subject to contract.

While the Third Parties and the defendant subsequently signed the Settlement Agreement, the claimant did not. Their solicitor indicated that the Agreement needed to be reviewed by the claimant’s Executive Officers before sign off. The other parties contended that agreement had already been reached irrespective of such sign off.

Ultimately, the claimant did not sign the Settlement Agreement and the proceedings were reinstated. The claimant contended that by circulating the draft Agreement on 29 August 2024 marked 'subject to contract,' the defendant was communicating unambiguously to the other parties that no binding Settlement Agreement would come into effect unless and until it was formally executed. The defendant and Third Party contended that the 'subject to contract' label fell away when the parties agreed to compromise the claim on 24 September 2024.

The Court decision

The Court confirmed that, as a matter of principle, once a negotiation included a 'subject to contract' reservation, that conditionality remained unless all parties expressly agreed it had been removed or such agreement was to be necessarily implied. The requirement to show such agreement/implication was a high bar. Each case, however, depended on its own facts.

In this case, by the email at 9.56 am on 24 September 2024, the claimant had agreed to all the terms of the Settlement Agreement sent under cover of the email dated 17th September 2024. That Settlement Agreement included, on the top of every page, the words 'Subject to contract and without prejudice save as to costs'.

In the Court’s view, if the emails up to and including that at 9.56 were all that could be relied upon, that was insufficient evidence to demonstrate the removal of the subject to contract reservation. There was nothing to demonstrate that the claimant and/or their solicitor had necessarily implied a removal of the subject to contract conditionality. There was nothing to show that the clear continued use of the subject to contract words in the travelling draft Settlement Agreements was being abandoned by the claimant or, for that matter, by the other parties as at 9.56 am on 24 September 2024.

The Court also thought that there was no pre-9.56 am conduct that in any way took the matter outside the normal in respect of an alleged binding agreement where the negotiations commenced and remained under subject to contract conditions. A reply 'accepting' the terms of a subject to contract agreement could not in and of itself lead to a binding agreement.

The Court added that the parties’ post-24 September conduct, even if admissible, was ambiguous at best. The fact that all parties agreed to stays of the timetable could not on an objective view be consistent with all parties believing that the underlying dispute had already been settled on a binding basis. Notwithstanding that the claimant's solicitors gave the impression that they hoped a signature to the execution version of the Settlement Agreement would be forthcoming post-24th September 2024, that of itself could not imply that the subject to contract reservation of the previous (agreed) version of the Settlement Agreement had already been removed. The defendant and Third Party had also not strenuously objected when the claimant’s solicitor indicated that a review of the Agreement was required by the Executive Officers.

The Court concluded that it was more than likely that the claimant had changed its mind at some time after 24th September 2024 and decided not to sign the executed version of the Settlement Agreement. On the evidence, it was not too late for the claimant to do that because there was no implicit removal of the subject to contract reservation by the claimant and the agreement remained subject to contract.

The applications were, therefore, dismissed.

Comment

Those entering into 'subject to contract' negotiations should ensure that once an agreement has been reached with counterparties, then this agreement should be confirmed in open correspondence and that the agreement is signed off by those who have authority to do so. Until then, there is no binding deal.