James passed a medical on Thursday afternoon and was sat at Elland Road waiting to be unveiled as the January transfer deadline passed at 11pm with Swansea refusing to sign the deal off.
The confusion unfolded despite Leeds and Swansea earlier striking an agreement for the winger to join United on loan to the end of the season and sign permanently in the summer if the Elland Road club won promotion.
The proposal was put in place after a week of protracted and complicated talks which saw Leeds try and fail to land James on a full-time basis with an up-front offer of £5m.
With an alternative offer on the table, United expected to confirm James’ arrival on Thursday evening but were left in limbo following a late complication over the structure of payments due to Swansea and the Welsh club’s failure to respond to contact from Elland Road. Leeds had agreed to pay a seven-figure loan fee as part of the transfer.
Swansea were deeply reluctant to lose James in this window but stood to receive a higher fee than £5m if United secured a place in the Premier League at the end of this season.
Despite their high opinion of of the Wales international, City have been under pressure to raise cash and lower their wage bill and he looked set to be part of a mass exodus of high-profile names from the Liberty Stadium on deadline day.
Leeds identified him as their prime outfield target when the window opened and stepped up attempts to sign James after the arrival of goalkeeper Kiko Casilla from Real Madrid on January 17.
Beverley-born James informed Swansea that he wanted to leave for West Yorkshire but spent all of Thursday morning waiting for the go-ahead to start a medical at United’s Thorp Arch training ground.
He travelled onto Elland Road around 6pm with the intention of signing his contract but was caught in a fresh wrangle between Leeds and Swansea as the deadline passed.