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the property market in most states at the moment is hot and in such a market it's quite common for parties to enter into pre-contract arrangements before formal contracts recently I've come across heads of agreement purporting to be binding on the parties as well as signed letters of offer and contracts being exchanged by way of email or fax so the question to ask is whether these arrangements are legally binding and enforceable there has been some guidance on this from the courts and I thought it would be useful over the next few minutes just to give some guidance to vendors and purchases whether or not these arrangements are binding and enforceable you should bear in mind that whether or not these arrangements are binding will depend on individual facts of your case the first thing to bear in mind is that it is unlikely that heads of agreement and letters of offer are going to be binding arrangements it's quite a widely accepted principle that if documents contain the words subject to contract or subjective formal contract then these arrangements will not be legally binding there was a case where a vendor went to market and advised a number of purchases that they would accept the highest offer by certain time and date after the the time and date had passed the vendor refused to exchange contracts with the highest bidder in that case the court actually held that that vendor was not legally obliged to exchange contracts with the highest bidder however I note that the vendors tender documentation in that case did contain the word subject to contract the other thing to note is that even if you're document purports to be legally binding on the parties that does not necessarily make them legally binding on the parties for that to be for those documents to be legally binding all the essential terms including price the amount of the deposit the names of the parties settlement date etc needs to be agreed to by the parties it's quite likely that they caught will hold at a deposit will also be required to be paid by a purchaser for that arrangement to be legally binding if parties are entering into negotiations pre-contract they should consider entering into a deed of exclusive dealing or they're already confident reality deed as such arrangements will give rise to legally enforceable arrangements and possibly damages lawsuit if there is a breach of these arrangements there's no there's no reason why such arrangements cannot contain any decree dated damages clause as well the next thing to bear in mind especially for purchases is that there is no binding contract until a vendor has provided the vendors sign counterpart to a purchaser so it's quite possible for a vendor to have several counterparts signed by different purchases without any obligation to exchange any of the contracts and the purchaser sorry davinder may in fact have a right to withdraw the property from the market if you're a purchaser it may be worth when submitting your counterpart to the vendor considering either having a expiry date on the end time on the offer or reserving the right to withdraw the contract from the vendor and this may prevent a vendor from using a purchasers offer as leverage against several competing offers it is possible to exchange a contract by way of telephone and fax especially if the entire contract is faxed to the other side shortly after or at the same time as the telephone conversation and bear in mind that the entire contract and not just the execution clauses has to be faxed this does extend to email exchange especially if other parts of the agreement does contemplate email communications however it's worth pointing out that you should try to include somewhere in the contract a right to exchange documents or give notices by way of email in order to make this happen it's quite common when you exchange contracts by a way of fax or email that certain parts of the contract go missing or there is clauses missing otherwise the two counterparts are not identical and in this situation a court has held it has held that a contract may still be legally binding as long as the material terms and pages are contained in the contract and what's missing is essentially non material or just mechanical parts of the contract and on the other hand if any material terms are missing such a subject to finance clauses then courts have held that there is no exchange of contracts and those arrangements are not legally binding as I said it will depend on your individual circumstances whether they are legally binding or not however please please feel free to email me if you have any queries thank you