The St Kitts & Nevis international forward, who came to Glanford Park on a free transfer from WBA, did not answer the club on the May 10th contract deadline.
Quailey and Andrew Dawson were the only two who didn't give a definate answer, with Dawson being made a special case as he considered a switch to the first division.
The club accepted his request, but manager Brian Laws warned that if another striker accepted a contract offer to join the club the door may be shut on Quails.
Bolton Wanderers forward Paul Wheatcroft has joined the club, and although it looked to question Quailey's future at the club the offer has only just been rescinded.
Brian Laws confirmed that Quailey would not be returning in July this morning on BBC Radio Humberside, saying the player only has himself to blame.
"He made a decision and he's dwelt on it and unfortunately someone else has took his place," said Laws.
One media source has speculated that Carlisle United may be a possible destination, however with the club's bank accounts now frozen and both playing and non-playing staff going without pay amidst a winding up order this looks highly unlikley.
The player however shouldn't have great difficulty finding a club, and may well line up against the Iron again this season.