Court Rules That A Side Letter Is An Unenforceable Agreement

The Court of Appeal recently had to consider whether a side letter, drafted in parallel to a binding contract, and whose purpose was to confirm the parties' agreement to enter, at a later date, into a separate secondary agreement, was itself legally binding. The case in question was Georgi Velichkov Barbudev v Eurocom Cable Management Bulgaria Food & Ors [2012].

Mr Barbudev ("Mr B") was the major shareholder of Bulgarian cable and internet company Eurocom Plovdiv EOOD ("Eurocom"). Eurocom was being sold to Warburg Pincus Group ("Pincus"), and Mr B wished to reinvest some, or all, of his share proceeds into the proposed new combined business. Mr B and Pincus agreed on an investment amount of 1,650,000 Euros and a figure of 10% of the shares.