A recent Delaware Court of Chancery opinion enforced an oral agreement which involved a settlement by a corporation of claims by a stockholder to expand the board. The terms of the oral deal included the expansion of the number of members of the board of directors to allow for an additional two seats to be appointed by the stockholder with whom the settlement agreement was entered into orally. In Sarissa Capital Domestic Fund LP v. Innoviva, Inc., C.A. No. 2017-0309-JRS (Del. Ch. Dec. 8, 2017), the court granted a declaratory judgment based on a claim pursuant to Section 225 of the Delaware General Corporation Law.

This 72-page decision is must-reading for anyone who:  (1) seeks to enforce an oral agreement, especially regarding corporate governance issues; and/or (2) needs to find controlling legal authority and judicial reasoning to support the enforcement of oral settlements even when not formally documented in a fully executed written agreement.  Compare the recent Chancery decision in Zohar II 2005-1, Ltd. v. FSAR Holdings, Inc., C.A. No. 12946-VCS (Del. Ch. Nov. 30, 2017) (rejecting the request to enforce an unwritten understanding unsupported by contemporaneous documentation).