Letter of Intent vs Binding Contract: How to Review Before You Sign

A two-page letter that says subject to contract can still lock a 19-person studio for ninety days. The letter of intent vs binding contract how to review before signing is a row-by-row job: mark fee bands as a roadmap, date exclusivity, confidentiality, and walk-away costs that already bind, then refuse to start work or pay a deposit on the letter alone.

On 1 September 2026, Priya — ops at a 19-person UK studio — has a four-page Letter of Intent marked subject to contract. A brand wants a six-week campaign. Clause 7 is binding exclusivity for 90 days, one-way. Clause 8 is perpetual confidentiality on all discussions. Clause 9 puts both sides’ costs on the studio if it walks. The producer booked Monday “because it’s only an LOI.” The hidden risk: Priya treats the label as a magic shield.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

Why is “subject to contract” not a magic shield?

In England and Wales, subject to contract is a strong signal that neither side intends to be bound until a formal contract. It is not a magic shield. Keep the words on this file and on later emails. Do not start the draft. A later “we’re on” chat can muddy the label.

The GOV.UK Land Compensation Manual uses the phrase so that no binding contract arises during negotiations. It is not normally used in Scotland. In RTS Flexible Systems [2010] UKSC 14 the parties agreed a £1,682,000 price, started work, and later varied the programme. They never exchanged signed copies. Conduct waived “not effective until signed.” Moral: agree first, start later. Do: stamp subject to contract on every pre-contract email. Sprintlaw notes a short email can bind. Typical mistake: mixing “STC” with “we guarantee exclusivity for three months” in one Slack.

How do you tell non-binding deal points from binding lock-ins?

Build the table before anyone signs. Fee band, outline scope, and “PSA to follow” are usually a roadmap if subject to contract sits on the file. Confidentiality, exclusivity, costs if talks die, and governing law often bind from signature even when the campaign price does not. The title does not decide the row.

LexisNexis updated its England and Wales heads-of-terms note on 21 May 2026: LOI, heads of terms, term sheet, and MoU are labels, not a statute. Carve-outs can bind while the deal stays subject to contract. ERDC Group v Brunel [2006] EWHC 687 (TCC) said there can be no prior assumptions from the name. Do: label each clause bind / not bind / ask counsel — a qualified lawyer.

Which exclusivity, costs, and confidentiality terms already bind?

Read those three as live contracts. A lock-out — do not negotiate with others for a fixed period, with consideration or as a deed — can bind today. A duty to negotiate in good faith generally does not, in England and Wales. Open-ended or one-way 90-day lock-outs are a High flag — an item scored high severity that a human must verify before anyone signs.

Freeths restated the split on 17 February 2026: Walford v Miles [1992] makes good-faith lock-ins unenforceable. Pitt v PHH [1994] holds a lock-out enforceable where the period is fixed and supported by consideration, or executed as a deed. For example, Priya’s 90-day one-way clause should pause Monday. LegalVision: draft as a lock-out, not a “must keep talking” lock-in. Do: date the lock-out and cap walk-away costs. Do not import US blogs that treat a good-faith duty as binding here.

What dates and long-stop do you write if talks die?

Write the exclusivity start, the exclusivity end, and a long-stop if no PSA exists by date X. Add what happens to deposits and who owns materials already produced. No long-stop plus no cost rule is an escalate. Do not pay a deposit on the letter alone.

If talks die, Priya’s four-pager leaves the 90-day lock-out running and the studio paying both sides’ solicitors. Do: write an end date and a dead-deal costs rule. Lease heads — FRI, the 1954 Act, break — belong on the commercial office lease review, not this campaign letter.

Why should you not start work on an LOI alone?

Do not start work — or book the shoot — on the letter alone. Starting performance can create an interim contract or waive subject to contract. An LOI can be accepted by conduct. If essential terms are still open you may have no contract and only a quantum meruit fight.

UKLegalGuides, maintained September 2026 for England and Wales only, sets Arcadis (accepted by conduct) against British Steel v Cleveland Bridge (no contract; possible quantum meruit). Walker Morris: starting work on subject-to-contract correspondence can waive the need for a completed contract. If the brand insists on Monday, cap scope, money, and expiry in a short interim. Do: keep the crew off site.

When do you sign, add subject-to-contract, or escalate?

Decide after the log, not after “just sign.” Sign as a roadmap only if subject to contract is consistent, deal points are expressly non-binding, exclusivity is a short dated lock-out with consideration, and no work or deposit starts until the PSA. Add subject to contract when the rows are fine but the stamp is missing. UKLegalGuides suggests “not intended to be legally binding except where expressly stated.” Name the carve-outs. Add a long-stop. Escalate when “shall deliver” sits with complete terms, or when Priya’s stack lands: 90-day one-way exclusivity, walk-away costs, Monday, a deposit.

You are done when the log is filled — title versus wording; subject to contract on this file and emails; carve-outs named; exclusivity dates; long-stop; work or deposit yes/no; keep / add STC / escalate — and one clause would pause Monday. When the PSA arrives, freeze the packet — the exact file set that will be signed — with the prepare-contract-packet guide. If the producer is about to click Sign, that is a who-can-sign question, not whether this LOI already binds. After the log, upload the same PDF to Checkory document analysis for a first-pass — a first machine pass that extracts clauses before a human reads every page. Workflow: wording → STC → bind/not-bind table → exclusivity/costs → dates → no work → sign or add STC or escalate.