LG Stuttgart (Stuttgart Regional Court), judgment of 9 June 2026 – 49 O 47/25, considered the circumstances under which negotiations concerning the sale of company shares may already result in a binding contract. The case focused on the intention to be legally bound during a video conference, the significance of a contemplated written record, the principles governing a commercial letter of confirmation and a possible preliminary contract. The judgment is not final; the appeal is pending before OLG Stuttgart (Stuttgart Higher Regional Court) under case no. 21 U 42/26.
Dispute over the sale of fund interests
The claimants sought payment from the defendant of a purchase price for interests in a fund company based in Stuttgart. The company was a closed-end real estate fund whose assets consisted of two buildings.
The claimants held direct and indirect or fiduciary interests in the fund company. Together, they held approximately 12.35 per cent of the fund’s capital, making them collectively the fund’s largest investor.
The defendant operated in the structuring, design, marketing and management of capital investments and investment and financing models. Both the general partner and the fund company’s limited partner acting as trustee were wholly owned subsidiaries of the defendant.
Discussions relating to another acquisition offer
In August 2024, the defendant informed the claimants that another company would offer the investors in the fund company and the investors in 18 other managed funds the opportunity to sell or exchange their interests. The claimants objected to this proposal in relation to the fund company concerned and announced that they would take the measures they considered necessary to oppose it.
The parties subsequently negotiated the sale of the fund interests held by the claimants. Following a telephone call on 16 September 2024 and a video conference the next day, possible commercial terms were coordinated internally.
A further video conference was held on 19 September 2024. Representatives of the claimants and the defendant participated. A representative of the defendant stated, in substance, that an agreement had been reached. The participants also discussed individual terms of the proposed transaction and the effects of the parallel offer to the other investors, the original offer period for which was due to run until 22 October 2024.
Term sheet not yet signed
Following the video conference, contact was established with a lawyer retained by the defendant. However, this did not result in any further action on the defendant’s side.
In October 2024, the claimants proposed an in-person meeting and requested evidence of the creditworthiness of the intended guarantors. After the meeting had been cancelled, the defendant requested drafts of the purchase agreement and financing documents in November 2024.
A representative of the claimants then sent the key points for a term sheet by email. According to him, the document was intended to record in writing the terms that had already been agreed. The purchase agreement and financing documents were to follow once the term sheet had been signed.
The defendant confirmed that the stated terms had been reproduced correctly. However, it objected to the identity of the proposed purchaser. The claimants then sent an appropriately revised term sheet and requested that it be signed. The defendant subsequently requested the inclusion of a further condition requiring a capital increase to be completed successfully first. The term sheet was not signed.
The claimants’ position
According to the claimants, the parties had already concluded an oral share purchase agreement during the video conference on 19 September 2024. The subsequent written documentation had deliberately been scheduled for a date after the original end of the parallel offer period.
In particular, the claimants argued:
- From their perspective, the defendant’s statements could only have been understood as binding consent to the sale of the interests.
- At the very least, the defendant had made a binding commitment to enter into the purchase agreement at a later date.
- The subsequent work of the lawyers involved was intended to be limited to putting into writing what had already been agreed orally.
- In addition to the commercial terms, the parties had also agreed on which company was to acquire the interests.
- Another company within the group could only have been designated as a substitute purchaser if the defendant had provided a guarantee.
LG Stuttgart dismissed the action. In its assessment, neither a principal agreement for the sale of the interests nor a binding preliminary contract had been concluded.
Criteria for establishing an intention to be legally bound
Whether a statement is made with the intention to be legally bound does not depend exclusively on the declarant’s subjective understanding. The decisive question is whether, taking all circumstances into account, the other party was entitled to assume that such an intention existed in accordance with good faith and customary practice.
Interpretation is carried out under §§ 133, 157 BGB (Bürgerliches Gesetzbuch, German Civil Code) on the basis of objective criteria. In particular, the following must be considered:
- the wording and objectively discernible meaning of the statements,
- the purpose pursued by the statements,
- the commercial and legal significance of the transaction,
- the interests of both parties,
- the conduct of the parties before and after the statement, and
- the other circumstances surrounding the negotiations.
Applying these criteria, the court regarded the video conference merely as coordination of the key commercial terms. From the perspective of an objective recipient, it was not apparent that the defendant intended to create binding legal consequences at that point.
Parallel offer as an apparent obstacle
According to the court’s findings, both parties knew that the ongoing offer to the other investors initially precluded a binding agreement. The offer was based on a securities prospectus. The information in that prospectus had to be accurate and complete for the purposes of civil and criminal liability.
In the court’s assessment, a simultaneous separate offer to the claimants would have had to be disclosed in the prospectus. It was therefore apparent to the claimants that the defendant did not intend to enter into a binding commitment while the offer period was still running. The court did not treat this point as a merely undisclosed reservation, but as a requirement of the defendant that was openly apparent from the recipients’ perspective.
The court did not consider it decisive whether individual conditions of the overall project, particularly a capital increase to provide financing or a further transaction as an exit option, had been presented consistently. A condition precedent under § 158(1) BGB requires a legal transaction whose effects depend on the occurrence of a future uncertain event. In the court’s view, however, there was no legally operative intention to conclude a contract in the first place.
The term “deal” was insufficient to conclude a contract
The use of the term “deal” during the video conference did not lead to a different conclusion. The court interpreted the statement in the context of the offer to investors that was still ongoing.
In the terminology used for corporate transactions, a “deal” is not necessarily synonymous with signing the agreement or closing the transaction. The subsequent correspondence also distinguished between the term sheet, the documentation and the later conclusion of the agreement.
In the court’s view, the claimants had therefore also indicated that the contract itself had yet to be concluded. A term sheet generally sets out the key terms of a proposed transaction without being identical to the final agreement.
Transaction volume weighed against an immediate binding commitment
According to LG Stuttgart, the transaction’s considerable commercial and legal significance also weighed against a binding contract having been concluded during the video conference. The proposed purchase price was just under EUR 20 million. At the same time, the transaction concerned the fund company’s largest investor.
In these circumstances, it could not be assumed that the participants intended to finalise the transaction conclusively and with binding effect during a video conference without further preparation. The prior approval obtained from the chair of the management board of an indirect majority shareholder did not alter this assessment. Such internal coordination could equally have been expedient for reaching a non-binding understanding of the commercial framework.
Moreover, after the discussion, the parties initially intended to involve lawyers to develop a viable contractual structure that took account of the ongoing offer to investors. These efforts did not result in the conclusion of an agreement.
Subsequent conduct confirmed that negotiations remained open
In the court’s assessment, the parties’ personal examination likewise did not establish that a binding oral contract had been concluded. The claimants’ representatives confirmed that the contemplated written record was connected with the parallel offer and the overall project. However, they maintained that it was intended merely to document an oral agreement that had already been reached.
The court took into account that, due to the parallel project, the claimants had a substantial interest in obtaining a binding arrangement. However, the defendant’s interest in not exposing itself to allegations of unlawful conduct while the offer was ongoing was equally apparent to them.
The intention to conclude the agreement therefore remained unilateral under §§ 145, 146 BGB. Furthermore, the parties did not intend to sign all agreements required for the transfer of the interests at an in-person meeting scheduled for November 2024. Instead, the term sheet that was subsequently circulated was initially to be considered at that meeting. For the court, this confirmed that further contractual negotiations were to follow the video conference.
Contemplated written form had constitutive effect
LG Stuttgart also based its assessment on § 154(2) BGB. The court interpreted the repeated references to putting the agreement in writing as an agreement that execution in the stipulated form would have constitutive effect.
According to the judgment, in a transaction of this scale and of substantial commercial and corporate significance, written form does not merely serve an evidentiary function. It is also intended to:
- define the contractual terms clearly and with legal certainty,
- protect the parties against hasty decisions, and
- determine conclusively the binding content of the transaction.
Under the rule of interpretation in § 154(2) BGB, the contract was therefore deemed not to have been concluded until it had been executed in the contemplated form. The court was able to leave open whether the fund company’s partnership agreement itself contained a written-form requirement for the sale of interests.
No contract based on a commercial letter of confirmation
In the view of LG Stuttgart, no contract arose from the subsequent email correspondence either. Under certain conditions, failure to object to a commercial letter of confirmation may result in a contract being deemed concluded on the terms set out in the confirmation.
This effect requires sufficiently specific contractual negotiations that justify a legitimate expectation in commercial dealings. As a rule, the recipient must also object without undue delay if it does not wish to be bound by the confirmed terms.
Timely objections to the emails
In the court’s view, the email of 19 November 2024 did not provide a sufficient basis for a commercial letter of confirmation. Although the defendant confirmed that the terms discussed had been reproduced correctly, it simultaneously objected to the identity of the purchaser. There was therefore an immediate objection to a material point.
The defendant also responded in time to the term sheet sent on 21 November 2024. On the third working day, it requested an additional condition in the form of the successful capital increase. Given the complexity and volume of the proposed transaction, the court regarded this response time as sufficient.
Written-form reservation precluded a binding effect through silence
Irrespective of this, silence could not replace the required declaration of acceptance. If a recipient has expressly made it clear that it intends to be bound only by a written declaration and that the contract is to be effective only if that form is observed, the other party may not rely on a binding obligation arising from mere silence.
According to the judgment, a merchant who has made its intention to be bound in writing apparent to the negotiating party need not expect a contract to be attributed to it through a letter of confirmation without express acceptance. As the parties had contemplated written execution with constitutive effect within the meaning of § 154(2) BGB, the subsequent email correspondence could not create a contract.
No claim under a preliminary contract
The claims asserted in the alternative on the basis of a preliminary contract were also unsuccessful. A preliminary contract requires a binding agreement to enter into a principal agreement at a later date. The essential terms of the principal agreement must be determined or at least capable of determination by applying general rules of interpretation and default statutory provisions.
This must be distinguished from an understanding that merely governs the further negotiation process or the preparation of a subsequent contract. Although the fact that individual points remain unresolved does not in itself preclude a preliminary contract, there must nevertheless be a discernible intention to assume a binding obligation to enter into the principal agreement at a later date.
The court considered it possible that the defendant’s conduct was capable of initially deterring the claimants from vigorously insisting on the announced conclusion of the agreement. The court was left with the impression that a representative of the defendant had sought to gain time and did not take the subsequent steps after the offer period ended unsuccessfully. This conduct might not have met the standards of fairness required in commercial dealings.
According to the judgment, however, this resulted in neither a preliminary contract nor a claim to require its conclusion. Until a contract is concluded, the parties are generally free, within the scope of freedom of contract, to withdraw from the proposed transaction. Merely delaying matters does not constitute an intention to be legally bound.
Given the transaction’s commercial significance, the ongoing offer to investors and the contractual documentation that had yet to be prepared, it was apparent to both parties that further steps were required. The parties had therefore also failed to express with sufficient clarity an intention to enter into a binding preliminary agreement.
Significance for negotiations concerning company shares
The decision illustrates that individual statements of agreement made during a discussion must not be viewed in isolation. The entire course of the negotiations, the significance of the transaction, unresolved regulatory issues, the planned contractual documentation and the parties’ conduct after the discussion remain decisive.
Particular significance may attach to a contemplated written record. If it is intended not merely to serve evidentiary purposes but to bring the contract into existence, there is generally no contractual commitment until signature. In these circumstances, silence in response to a summary email or term sheet cannot replace the missing written acceptance either.
As the judgment is not final and the appeal remains pending, the further assessment by OLG Stuttgart must be awaited. For questions concerning the drafting, interpretation or enforcement of agreements relating to company shares, MTR Legal advises companies, investors and high-net-worth individuals as part of its corporate law advisory services.
