How to beat 'subject to approval'?

Contractor's Question: I recently received a contract offer with a global consulting firm. At the time, my recruiter said that I've secured the contract 'subject to approval.' That was two weeks ago, and I'm still waiting for approval. My agent says they haven't heard back from the client. Any advice on what to do next ? I may drop the contract, but is there likely to be any liability on my part if I do? In future, is there an advisable way for me to get round 'subject to approval,' or will I simply be at the client's mercy, again?!

Expert's Answer:'Subject to contract/approval' is a concept that touches on what is sometimes considered the third essential ingredient for formation of contract – intention to create legal relations.

That said, this intention is rarely in doubt in commercial contracts, so intention to create legal relations is often considered to be more like an element of the consideration doctrine. Use of the term 'Subject to contract' therefore represents a strong presumption that the consideration needed on both sides to complete the contract is not present until a formal document has been executed.

In English, this means that the words 'subject to contract/approval' represent the fact that the contract is not formed as yet. To be sure of your position, check whether you have had, or can obtain, anything in writing showing this term before you ship out and start a contract elsewhere.

In future, you may consider getting this early written confirmation of this intent (or lack of intent!). Also, and to avoid a longer than acceptable delay, indicate to the agent/client some idea of the timescale you are prepared to accept for conclusion of any approval process.

The expert was Jody Tsigarides, of the internet and e-commerce team at Lawdit Solicitors.

Thursday 11th Mar 2010