diff --git a/codex/contracts/market.nim b/codex/contracts/market.nim
index 3ca0d0e63..1b87d4b19 100644
--- a/codex/contracts/market.nim
+++ b/codex/contracts/market.nim
@@ -260,7 +260,8 @@ method canReserveSlot*(
   requestId: RequestId,
   slotIndex: UInt256): Future[bool] {.async.} =
 
-  await market.contract.canReserveSlot(requestId, slotIndex)
+  convertEthersError:
+    return await market.contract.canReserveSlot(requestId, slotIndex)
 
 method subscribeRequests*(market: OnChainMarket,
                          callback: OnRequest):
diff --git a/codex/sales/states/ignored.nim b/codex/sales/states/ignored.nim
index 7a70fb203..93346fdc4 100644
--- a/codex/sales/states/ignored.nim
+++ b/codex/sales/states/ignored.nim
@@ -8,8 +8,13 @@ import ./errorhandling
 logScope:
   topics = "marketplace sales ignored"
 
+# Ignored slots could mean there was no availability or that the slot could
+# not be reserved.
+
 type
   SaleIgnored* = ref object of ErrorHandlingState
+    reprocessSlot*: bool # readd slot to queue with `seen` flag
+    returnBytes*: bool # return unreleased bytes from Reservation to Availability
 
 method `$`*(state: SaleIgnored): string = "SaleIgnored"
 
@@ -17,7 +22,5 @@ method run*(state: SaleIgnored, machine: Machine): Future[?State] {.async.} =
   let agent = SalesAgent(machine)
 
   if onCleanUp =? agent.onCleanUp:
-    # Ignored slots mean there was no availability. In order to prevent small
-    # availabilities from draining the queue, mark this slot as seen and re-add
-    # back into the queue.
-    await onCleanUp(reprocessSlot = true)
+    await onCleanUp(reprocessSlot = state.reprocessSlot,
+                    returnBytes = state.returnBytes)
diff --git a/codex/sales/states/preparing.nim b/codex/sales/states/preparing.nim
index d7f38f5b0..c92ec7166 100644
--- a/codex/sales/states/preparing.nim
+++ b/codex/sales/states/preparing.nim
@@ -11,7 +11,7 @@ import ./cancelled
 import ./failed
 import ./filled
 import ./ignored
-import ./downloading
+import ./slotreserving
 import ./errored
 
 declareCounter(codex_reservations_availability_mismatch, "codex reservations availability_mismatch")
@@ -50,7 +50,7 @@ method run*(state: SalePreparing, machine: Machine): Future[?State] {.async.} =
   let slotId = slotId(data.requestId, data.slotIndex)
   let state = await market.slotState(slotId)
   if state != SlotState.Free:
-    return some State(SaleIgnored())
+    return some State(SaleIgnored(reprocessSlot: false, returnBytes: false))
 
   # TODO: Once implemented, check to ensure the host is allowed to fill the slot,
   # due to the [sliding window mechanism](https://github.com/codex-storage/codex-research/blob/master/design/marketplace.md#dispersal)
@@ -71,7 +71,7 @@ method run*(state: SalePreparing, machine: Machine): Future[?State] {.async.} =
       request.ask.collateral):
     debug "No availability found for request, ignoring"
 
-    return some State(SaleIgnored())
+    return some State(SaleIgnored(reprocessSlot: true))
 
   info "Availability found for request, creating reservation"
 
@@ -88,11 +88,11 @@ method run*(state: SalePreparing, machine: Machine): Future[?State] {.async.} =
     if error of BytesOutOfBoundsError:
        # Lets monitor how often this happen and if it is often we can make it more inteligent to handle it
       codex_reservations_availability_mismatch.inc()
-      return some State(SaleIgnored())
+      return some State(SaleIgnored(reprocessSlot: true))
 
     return some State(SaleErrored(error: error))
 
   trace "Reservation created succesfully"
 
   data.reservation = some reservation
-  return some State(SaleDownloading())
+  return some State(SaleSlotReserving())
diff --git a/codex/sales/states/slotreserving.nim b/codex/sales/states/slotreserving.nim
new file mode 100644
index 000000000..d4343fd3f
--- /dev/null
+++ b/codex/sales/states/slotreserving.nim
@@ -0,0 +1,61 @@
+import pkg/questionable
+import pkg/questionable/results
+import pkg/metrics
+
+import ../../logutils
+import ../../market
+import ../salesagent
+import ../statemachine
+import ./errorhandling
+import ./cancelled
+import ./failed
+import ./filled
+import ./ignored
+import ./downloading
+import ./errored
+
+type
+  SaleSlotReserving* = ref object of ErrorHandlingState
+
+logScope:
+  topics = "marketplace sales reserving"
+
+method `$`*(state: SaleSlotReserving): string = "SaleSlotReserving"
+
+method onCancelled*(state: SaleSlotReserving, request: StorageRequest): ?State =
+  return some State(SaleCancelled())
+
+method onFailed*(state: SaleSlotReserving, request: StorageRequest): ?State =
+  return some State(SaleFailed())
+
+method onSlotFilled*(state: SaleSlotReserving, requestId: RequestId,
+                     slotIndex: UInt256): ?State =
+  return some State(SaleFilled())
+
+method run*(state: SaleSlotReserving, machine: Machine): Future[?State] {.async.} =
+  let agent = SalesAgent(machine)
+  let data = agent.data
+  let context = agent.context
+  let market = context.market
+
+  logScope:
+    requestId = data.requestId
+    slotIndex = data.slotIndex
+
+  let canReserve = await market.canReserveSlot(data.requestId, data.slotIndex)
+  if canReserve:
+    try:
+      trace "Reserving slot"
+      await market.reserveSlot(data.requestId, data.slotIndex)
+    except MarketError as e:
+      return some State( SaleErrored(error: e) )
+
+    trace "Slot successfully reserved"
+    return some State( SaleDownloading() )
+
+  else:
+    # do not re-add this slot to the queue, and return bytes from Reservation to
+    # the Availability
+    debug "Slot cannot be reserved, ignoring"
+    return some State( SaleIgnored(reprocessSlot: false, returnBytes: true) )
+
diff --git a/tests/codex/helpers/mockmarket.nim b/tests/codex/helpers/mockmarket.nim
index ed460adb2..13dc86012 100644
--- a/tests/codex/helpers/mockmarket.nim
+++ b/tests/codex/helpers/mockmarket.nim
@@ -38,6 +38,8 @@ type
     signer: Address
     subscriptions: Subscriptions
     config*: MarketplaceConfig
+    canReserveSlot*: bool
+    reserveSlotThrowError*: ?(ref MarketError)
   Fulfillment* = object
     requestId*: RequestId
     proof*: Groth16Proof
@@ -105,7 +107,7 @@ proc new*(_: type MockMarket): MockMarket =
       downtimeProduct: 67.uint8
     )
   )
-  MockMarket(signer: Address.example, config: config)
+  MockMarket(signer: Address.example, config: config, canReserveSlot: true)
 
 method getSigner*(market: MockMarket): Future[Address] {.async.} =
   return market.signer
@@ -303,6 +305,29 @@ method canProofBeMarkedAsMissing*(market: MockMarket,
                                   period: Period): Future[bool] {.async.} =
   return market.canBeMarkedAsMissing.contains(id)
 
+method reserveSlot*(
+  market: MockMarket,
+  requestId: RequestId,
+  slotIndex: UInt256) {.async.} =
+
+  if error =? market.reserveSlotThrowError:
+    raise error
+
+method canReserveSlot*(
+  market: MockMarket,
+  requestId: RequestId,
+  slotIndex: UInt256): Future[bool] {.async.} =
+
+  return market.canReserveSlot
+
+func setCanReserveSlot*(market: MockMarket, canReserveSlot: bool) =
+  market.canReserveSlot = canReserveSlot
+
+func setReserveSlotThrowError*(
+  market: MockMarket, error: ?(ref MarketError)) =
+
+  market.reserveSlotThrowError = error
+
 method subscribeRequests*(market: MockMarket,
                           callback: OnRequest):
                          Future[Subscription] {.async.} =
diff --git a/tests/codex/helpers/mockreservations.nim b/tests/codex/helpers/mockreservations.nim
index cbc95bc18..64b52676d 100644
--- a/tests/codex/helpers/mockreservations.nim
+++ b/tests/codex/helpers/mockreservations.nim
@@ -6,6 +6,7 @@ import pkg/questionable/results
 type
   MockReservations* = ref object of Reservations
     createReservationThrowBytesOutOfBoundsError: bool
+    createReservationThrowError: ?(ref CatchableError)
 
 proc new*(
     T: type MockReservations,
@@ -14,9 +15,16 @@ proc new*(
   ## Create a mock clock instance
   MockReservations(availabilityLock: newAsyncLock(), repo: repo)
 
-proc setCreateReservationThrowBytesOutOfBoundsError*(self: MockReservations, flag: bool) =
+proc setCreateReservationThrowBytesOutOfBoundsError*(
+  self: MockReservations, flag: bool) =
+
   self.createReservationThrowBytesOutOfBoundsError = flag
 
+proc setCreateReservationThrowError*(
+  self: MockReservations, error: ?(ref CatchableError)) =
+
+  self.createReservationThrowError = error
+
 method createReservation*(
   self: MockReservations,
   availabilityId: AvailabilityId,
@@ -29,5 +37,8 @@ method createReservation*(
         "trying to reserve an amount of bytes that is greater than the total size of the Availability")
       return failure(error)
 
+    elif error =? self.createReservationThrowError:
+      return failure(error)
+
     return await procCall createReservation(Reservations(self), availabilityId, slotSize, requestId, slotIndex)
 
diff --git a/tests/codex/sales/states/testignored.nim b/tests/codex/sales/states/testignored.nim
index 680dca8db..4f4dbbf6e 100644
--- a/tests/codex/sales/states/testignored.nim
+++ b/tests/codex/sales/states/testignored.nim
@@ -39,7 +39,8 @@ asyncchecksuite "sales state 'ignored'":
     agent.onCleanUp = onCleanUp
     state = SaleIgnored.new()
 
-  test "calls onCleanUp with returnBytes = false and reprocessSlot = true":
+  test "calls onCleanUp with values assigned to SaleIgnored":
+    state = SaleIgnored(reprocessSlot: true, returnBytes: true)
     discard await state.run(agent)
-    check eventually returnBytesWas == false
+    check eventually returnBytesWas == true
     check eventually reprocessSlotWas == true
diff --git a/tests/codex/sales/states/testpreparing.nim b/tests/codex/sales/states/testpreparing.nim
index c095d99e1..22d2ef7cf 100644
--- a/tests/codex/sales/states/testpreparing.nim
+++ b/tests/codex/sales/states/testpreparing.nim
@@ -4,7 +4,7 @@ import pkg/datastore
 import pkg/stew/byteutils
 import pkg/codex/contracts/requests
 import pkg/codex/sales/states/preparing
-import pkg/codex/sales/states/downloading
+import pkg/codex/sales/states/slotreserving
 import pkg/codex/sales/states/cancelled
 import pkg/codex/sales/states/failed
 import pkg/codex/sales/states/filled
@@ -84,17 +84,33 @@ asyncchecksuite "sales state 'preparing'":
     availability = a.get
 
   test "run switches to ignored when no availability":
-    let next = await state.run(agent)
-    check !next of SaleIgnored
+    let next = !(await state.run(agent))
+    check next of SaleIgnored
+    let ignored = SaleIgnored(next)
+    check ignored.reprocessSlot
+    check ignored.returnBytes == false
 
-  test "run switches to downloading when reserved":
+  test "run switches to slot reserving state after reservation created":
     await createAvailability()
     let next = await state.run(agent)
-    check !next of SaleDownloading
+    check !next of SaleSlotReserving
 
   test "run switches to ignored when reserve fails with BytesOutOfBounds":
     await createAvailability()
     reservations.setCreateReservationThrowBytesOutOfBoundsError(true)
 
-    let next = await state.run(agent)
-    check !next of SaleIgnored
+    let next = !(await state.run(agent))
+    check next of SaleIgnored
+    let ignored = SaleIgnored(next)
+    check ignored.reprocessSlot
+    check ignored.returnBytes == false
+
+  test "run switches to errored when reserve fails with other error":
+    await createAvailability()
+    let error = newException(CatchableError, "some error")
+    reservations.setCreateReservationThrowError(some error)
+
+    let next = !(await state.run(agent))
+    check next of SaleErrored
+    let errored = SaleErrored(next)
+    check errored.error == error
diff --git a/tests/codex/sales/states/testslotreserving.nim b/tests/codex/sales/states/testslotreserving.nim
new file mode 100644
index 000000000..c54fb2aa6
--- /dev/null
+++ b/tests/codex/sales/states/testslotreserving.nim
@@ -0,0 +1,73 @@
+import pkg/chronos
+import pkg/questionable
+import pkg/codex/contracts/requests
+import pkg/codex/sales/states/slotreserving
+import pkg/codex/sales/states/downloading
+import pkg/codex/sales/states/cancelled
+import pkg/codex/sales/states/failed
+import pkg/codex/sales/states/filled
+import pkg/codex/sales/states/ignored
+import pkg/codex/sales/states/errored
+import pkg/codex/sales/salesagent
+import pkg/codex/sales/salescontext
+import pkg/codex/sales/reservations
+import pkg/codex/stores/repostore
+import ../../../asynctest
+import ../../helpers
+import ../../examples
+import ../../helpers/mockmarket
+import ../../helpers/mockreservations
+import ../../helpers/mockclock
+
+asyncchecksuite "sales state 'SlotReserving'":
+  let request = StorageRequest.example
+  let slotIndex = (request.ask.slots div 2).u256
+  var market: MockMarket
+  var clock: MockClock
+  var agent: SalesAgent
+  var state: SaleSlotReserving
+  var context: SalesContext
+
+  setup:
+    market = MockMarket.new()
+    clock = MockClock.new()
+
+    state = SaleSlotReserving.new()
+    context = SalesContext(
+      market: market,
+      clock: clock
+    )
+
+    agent = newSalesAgent(context,
+                          request.id,
+                          slotIndex,
+                          request.some)
+
+  test "switches to cancelled state when request expires":
+    let next = state.onCancelled(request)
+    check !next of SaleCancelled
+
+  test "switches to failed state when request fails":
+    let next = state.onFailed(request)
+    check !next of SaleFailed
+
+  test "switches to filled state when slot is filled":
+    let next = state.onSlotFilled(request.id, slotIndex)
+    check !next of SaleFilled
+
+  test "run switches to downloading when slot successfully reserved":
+    let next = await state.run(agent)
+    check !next of SaleDownloading
+
+  test "run switches to ignored when slot reservation not allowed":
+    market.setCanReserveSlot(false)
+    let next = await state.run(agent)
+    check !next of SaleIgnored
+
+  test "run switches to errored when slot reservation errors":
+    let error = newException(MarketError, "some error")
+    market.setReserveSlotThrowError(some error)
+    let next = !(await state.run(agent))
+    check next of SaleErrored
+    let errored = SaleErrored(next)
+    check errored.error == error
diff --git a/tests/codex/sales/teststates.nim b/tests/codex/sales/teststates.nim
index 738101345..4346afb5e 100644
--- a/tests/codex/sales/teststates.nim
+++ b/tests/codex/sales/teststates.nim
@@ -10,5 +10,6 @@ import ./states/testcancelled
 import ./states/testerrored
 import ./states/testignored
 import ./states/testpreparing
+import ./states/testslotreserving
 
 {.warning[UnusedImport]: off.}
diff --git a/vendor/codex-contracts-eth b/vendor/codex-contracts-eth
index 33010bd20..807fc973c 160000
--- a/vendor/codex-contracts-eth
+++ b/vendor/codex-contracts-eth
@@ -1 +1 @@
-Subproject commit 33010bd20cfdc3d589be25782052796af580ca83
+Subproject commit 807fc973c875b5bde8f517c71c818ba8f2f720dd