Barbudev v Eurocom Cable Management Bulgaria EOOD [2011] EWHC 1560 (Comm)

The Claimant had been a shareholder of a cable television and internet company (the “Company”), which was acquired by the First Defendant. The First Defendant was, in turn, owned by the Third Defendant, and both companies were party of an international group whose UK business was run by the Second Defendant.

Prior to the acquisition of the Company, the First Defendant sent a side letter to the Claimant stating that in consideration for him signing the transaction documents, he would be offered the opportunity to invest in the First Defendant. Certain terms relating to this investment were set out in the side letter. The Claimant executed a share purchase agreement (the “SPA”) with the First Defendant, and the Company was sold.  

The Claimant argued that the side letter was evidence of a partly oral and partly written binding agreement that he had the right to an ongoing investment in the entity which was formed by way of the acquisition, and that that agreement had been fundamental to him proceeding to execute the SPA.

The Court found in favour of the Defendants, finding that the side letter did not amount to a legally enforceable contact. The issue as to exactly what agreement was contained in the side letter depended on a construction of that letter. On the facts, the letter constituted only an agreement to agree, which was unenforceable. Even though some key terms had been included in the letter, and although the parties had agreed in principle, there was no finality. Further, some essential terms had not been addressed by the side letter.

The judgment in this matter provides a useful guide to the application of the now wellestablished legal principles on the formation of a binding contract.