Can settlement negotiations which are ‘Subject to Contract’ become binding?

The Technology & Construction Court judgment in Baltimore Wharf SLP v Ballymore Properties Limited v WSP UK Limited (formerly known as WSP Buildings Limited) [2026] EWHC 312 (TCC) considers whether a binding agreement can be reached during settlement negotiations which are carried out on a ‘subject to contract’ basis. The Court’s decision to refuse to find a binding agreement underscores the strength of the subject-to-contract reservation in the context of settlement correspondence.

Background

Following the collapse of a nursery roof at Baltimore Wharf in July 2023, Baltimore Wharf SLP (the ‘Claimant’) sought damages in tort and under a collateral warranty against Ballymore Properties Limited (the ‘Defendant’). The Defendant issued a Part 20 claim against WSP UK Limited (the ‘Third Party’). Settlement discussions taking place between July and September 2024 were labelled as ‘subject to contract’.

On 24 September, after WSP UK Limited, the Third Party, accepted the Defendant’s amendments to the draft settlement agreement, the Claimant’s solicitors circulated an email to the other parties at 9.56 am confirming that a settlement agreement had been agreed.

However, the settlement agreement was subsequently signed only by the Defendant and the Third Party, raising the issue of whether the Claimant’s email constituted a binding settlement. The Defendant and the Third Party applied for summary judgment or strike-out of the Claimant’s actions on the basis that settlement of the Claimant’s claim had been reached.

Key points:

1. The judgment reinforces the principle confirmed in Joanne Properties Limited v Moneything Capital Limited [[2020] EWCA Civ 1541], namely that the subject-to-contract qualification remains legally effective unless its removal is express or ‘necessarily implied’ (a high bar). The Claimant’s email simply accepted the terms of a settlement agreement labelled as ‘subject to contract’.
2. At no point was there an express agreement to remove the subject-to-contract umbrella, nor any implied removal of this protection as in Jirehouse Capital v Beller, [[2009] EWHC 2536 (Ch)] where the parties clearly conducted themselves as if a binding agreement had been reached shortly before a trial. In Baltimore, it was significant that all parties agreed to extend the stay of court proceedings that the Defendant and the Third Party maintained they had understood to have been settled at the time of the agreement to extend the stay. Furthermore, neither the Defendant nor the Third Party showed any clear ‘surprise or disappointment’ when, in October, the Claimant’s solicitors stated that the agreement remained subject to the Claimant’s review before signature. 
3. As a result, the Claimant had a reasonably arguable defence that its solicitors’ email sent at 9.56 am on 24 September 2024 did not amount to a binding settlement.

Practical Implications

1.‘Subject to contract’ is enforced strictly

Retaining the ‘subject to contract’ reservation in all correspondence enables parties to maintain flexibility during settlement negotiations. Conversely, if parties intend to be bound before signature, they should clarify that the subject-to-contract limitation no longer applies.

2. Conduct matters

In the context of subject-to-contract negotiations, a party that believes that a settlement agreement has been conclusively reached and is binding may find that conduct pointing the other way weakens that argument.

In short: Agreeing to the terms of a settlement agreement without waiving the subject-to-contract limitation does not give rise to a binding settlement. Post-agreement conduct is relevant to establishing whether a waiver of this limitation is ‘necessarily implied’.

Click here for the decision.

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