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What does subject to mean in a contract?
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What Does Subject To Mean
Quite often, you may come across the phrase “subject to” in contracts, legal documents, forms, or other documents.
What does “subject to” mean exactly?
Why do lawyers and contract professionals use the phrase subject to in their contracts and legal documents?
In essence, “subject to” in contracts allows you to establish a priority or hierarchy in the legal obligations that you are introducing.
It’s like saying “provided you” respect the terms of one thing, you should do something else.
For example, subject to the rules outlined in the travel policy, employees may travel up to twice a year to meet their clients.
In this example, you’re using the phrase “subject to” to indicate to the employees that they may travel to meet their clients but must respect the travel policy’s rules.
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Subject To Meaning In Law
From a legal perspective, the phrase “subject to” establishes a rank or priority between different concepts.
You can consider “subject to” in law to mean “conditional upon” or “dependent on”.
When a legal concept is introduced using the “subject to” phrase, it means that this legal concept is dominated by another concept.
In other words, the legal concept that is introduced by the “subject to” phrase must observe or respect the legal obligations contained in the referenced provision.
For example, “Subject to Section 3, Party A may…”.
In this case, Party A must exercise its rights or obligations subject to complying with the terms outlined in Section 3.
Subject To Meaning In Contracts
Using the phrase “subject to” in contracts allows you to clarify a possible contradiction of terms or possible overlap.
For instance, if you’re negotiating an indemnification clause but you’re looking to cap your total exposure to the liability cap clause, you can use the “subject to” to further clarify the matter.
You’ll draft your clause as “Subject to Section X (liability cap clause), Party A shall indemnify and hold Party B harmless against…”.
In this case, you’re making it clear that although you’re providing an indemnification, the total liability should be capped by the liability cap clause in Section X.
If you’re using the subject to phrase in your legal documents and contracts, make sure you use it properly.
If you’re looking to clarify the legal obligations, consider rewriting the provision rather than using the subject to phrase.
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Subject To Examples
Let’s look at a few examples of the use of subject to in legal writing and contracts.
Example 1
The provisions which may be subject to conditions in the Companies Law shall apply to the Company wherever it is not stated to the contrary in these Articles of Association and as long as there is no contradiction between them and the provisions of these Articles of Association.
Example 2
The shares of common stock are issuable upon the exercise of a warrant to purchase shares of common stock with an exercise price of $10.00 per share, subject to customary adjustments.
Example 3
Class A shares shall be sold at net asset value plus a front-end sales charge, at net asset value without a front-end sales charge but subject to a contingent deferred sales charge
Takeaways
So there you have it folks!
Very often, you’ll see the phrase subject to appear in contracts, forms, statutes, policy documents, or other legal documents.
Many lawyers and contracting professionals use the subject to phrase in their legal writing to present one legal concept by clarifying that the new concept is “dependent on” the observance of another concept.
The best advice I can give you is to keep your contract terms and conditions as simple as possible.
Make sure you only use the subject to phrase to ensure your contractual rights and obligations are clearly prioritized or cross-referenced.
Otherwise, you should avoid using it to avoid introducing interpretation issues into your contracts.
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