The use of the words subject to contract in an agreement will, except in a very strong and exceptional case, prevent an implied binding contract from arising on the basis that the phrase is used to indicate that until a formal contract is executed, the parties do not intend to owe each other contractual obligations. The words ‘subject to contract’ is used on documents exchanged by parties during contract negotiations. These words denote that the document is not an offer or acceptance and negotiations are still going on. The expression ‘without prejudice’ is also used in place of ‘subject to contract’.
