When is a side letter not a side letter?

Side letters are sometimes used to provide comfort in relation to parties' intentions during contractual negotiations.  The recent case of Barbudev v Eurocom Cable Management Bulgaria EOOD and Others [2011] EWHC 1560 (Comm) is a timely reminder of what is required to form a legally binding contract:

  • Terms which are intended to be legally binding should be reviewed to ensure that they are in fact enforceable rather than merely agreements to agree;
  • The terms of the side letter must be certain enough to be performed without the requirement for further negotiation or rely on the outcome of future unpredictable events.
  • The inclusion of “boiler plate” legal clauses such as an exclusion of third party rights and an governing law and jurisdiction clause cannot alter the actual substance of the letter and create a binding contract. 

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