Side Letter Sidelined As Agreement To Agree

What? A side letter gave the claimant the opportunity to invest on terms to be agreed. It was held that this was an agreement to agree and therefore not legally enforceable.

So what? If the letter, or any specific provisions, are intended to be legally binding, this should be clear and the provisions should be drafted in such a way as to be capable of being legally binding and not an agreement to agree.

The case of Barbudev v Eurocom Cable Management Bulgaria EOOD [2011] concerned parties who entered into a share purchase agreement (SPA) and a side letter. The side letter provided that, in consideration for the claimant selling his shares to the defendant under the SPA, the defendant would offer him the opportunity to invest in the purchaser on terms to be agreed, which would be set out in an investment agreement.

The side letter provided that the investment agreement would include the following terms:

the price would be not less than €1.65m in consideration for a combination of shareholder debt and registered shares, which would represent 10 per cent of the registered share capital "tag along and drag along provisions which are customary for a transaction of this nature". The judge held that the side letter was not legally...