23
Nov
What does "Subject to Contract" mean?
Q.
My agent has written to me on a number of occasions about various
different things and always seems to add the phrase “Subject
to Contract.” Why?
A.
Many agents – although these days by no means all –
routinely insert this phrase in all such correspondence,
particularly when confirming receipt of an offer. They do so in
order to emphasise the fact that the offer – or whatever else
they’re writing to you about - is only provisional at that
stage, and cannot therefore be considered legally binding. In this
respect, the phrase is not dissimilar to those words beloved of
cautious solicitors everywhere, “without
prejudice.”
In the past, adding
this caveat to correspondence related to property transactions was
rather more important than it is today, since contracts for the
sale or purchase of land could be verbal. The use of the term
“subject to contract” therefore represented a crucial
legal safeguard, since it prevented anyone falsely citing such a
document as evidence that a verbal contract was in existence. This,
amazingly enough, only ceased to be an issue as recently as 1989,
when new legislation decreed that all contracts for the sale of
land must henceforth be in writing.
These days,
therefore, the use of the phrase in letters of this kind is more a
matter of form than a strict legal requirement. That said, however,
endorsing a preliminary offer as being ‘Subject to
Contract’ still serves as a useful reminder that it is not
binding on either party.
Actually, it’s
not a bad idea to add the phrase to any letters you yourself write
to your agent or solicitor. It’s easy enough to work it into
a sentence somewhere – or alternatively you can just stick it
on its own at the top of the page. However, don’t worry if
you leave it out!
Of course, the same
phrase – often shortened to plain “STC” - also
appears on agents’ Sold boards to indicate that although a
sale has been agreed, there is as yet no binding contract between
seller and buyer. Or at least, it should appear –
however small and insignificant it may be, since boards that simply
say “Sold” are actually illegal. But that’s
another story…!