New Media Holding Company LLC v Kuznetsov

A document described as a “term sheet” may constitute a binding contract. The question is whether, viewed objectively, its wording and the parties’ conduct show an intention to create legal relations and agreement on essential terms. A unilateral redemption notice is valid if it complies with the contractual requirements; additional information should not be implied unless necessary for business efficacy or obviously intended. Subsequent events or procedural defects under foreign company law do not retrospectively invalidate an otherwise valid notice where the underlying transfer remains legally possible.

The claimant, as assignee of Mr Vladimir Gusinski’s rights, claimed payment from Mr Ivan Kuznetsov under a Term Sheet concerning a redemption right over shares in Energokom, a Latvian company. The defendant contended that the Term Sheet was non-binding, unsupported by consideration, and that the October 2012 redemption notice was invalid because it did not identify the precise shares or comply with Latvian pre-emption requirements. The court determined whether the Term Sheet was enforceable and, if so, whether the notice validly exercised the redemption right.

1. The Term Sheet was binding. Contractual intention was assessed objectively by reference to the language used, the commercial context and the parties’ conduct. The description “term sheet” did not prevent contractual effect. The document contained unqualified rights and obligations, an English governing-law and jurisdiction clause, and detailed notice provisions. The parties were sophisticated businessmen in a pre-existing contractual relationship, supporting a strong presumption of legal intention.
2. The Term Sheet was supported by consideration. Mr Gusinski promised continued financial support for Energokom and temporarily agreed not to pursue an investigation into its management. Those promises and forbearance conferred practical benefits and were not past consideration because the earlier Road Map was neither binding nor performed on matching terms.
3. The redemption notice was valid. The Term Sheet required only that notice be sent to the specified email address or postal address. It did not require identification of the precise corporate vehicle or registered shareholder. The expression “16.6% of the Company in possession of Mr Gusinski or affiliated person” was sufficiently broad to include the shares held through Bedford, Trumia and Wain.
4. Non-compliance with the procedural requirements for Latvian statutory pre-emption rights did not invalidate the notice. The transfer was not automatically void, the defects were procedural, and the necessary formalities could have been remedied. Nor was there any basis to imply a term making payment conditional on the claimant being “willing and able” to procure transfer.
5. There was judgment for the claimant on the claim, with interest. Consequential orders were reserved.