Reasonable Endeavours

Insights - 08/11/2021

There’s a reason for the sunshine in the sky,

And there’s a reason why we need to talk about reasonable endeavours

(With apologies to the Bellamy Brothers)

Legal documents nearly always impose obligations on the parties to do something, or to refrain from doing something. Often, those obligations are unqualified. For example, Mr A must pay Mr B £500 by 30 October 2021.

Just as often, those obligations are qualified by a requirement that a party should do his best to pay Mr B £500 by 30 October 2021 (is it worth changing this to a current/future date?). The lawyerly phrases used for doing your best to achieve something are called endeavours clauses, and they tend to appear in three variations: an obligation to use all reasonable endeavours, reasonable endeavours, and best endeavours. There are others: all reasonable best endeavours, and good faith endeavours. But what do they all mean? And which is the more powerful obligation? If you are the subject of a do your best clause, you need to know how hard you have to try in order to achieve the obligation imposed on you or risk a claim for breach of contract.

Rather surprisingly for such a commonly used and important contractual obligation, none of the endeavours clauses most commonly used have been defined in a statute.  Common sense suggests that the most onerous of the endeavours clauses is best endeavours, followed by all reasonable endeavours, and the least onerous is reasonable endeavours. As you might expect from a legal definition, the line between all reasonable endeavours and reasonable endeavours is not clear.

Best endeavours requires you to “take all those steps in [your] power which are capable of producing the desired result, being steps which a prudent, determined and reasonable [person] acting in his own interests and desiring to achieve that result, would take.” [1] This includes a duty to take steps that are commercially unreasonable, but a line is drawn at expenditure that is without purpose and to no avail.

All reasonable endeavours and best endeavours
Generally, all reasonable endeavours is equal to or less than best endeavours, and more onerous than reasonable endeavours, but it has been used to mean either. It will be a question of construction and the obligation has to be considered in the factual matrix of each case. In an all reasonable endeavours obligation, where the obligation is to obtain something from a third party (for example, planning permission) the sacrifice of one’s own commercial interests is not required. In a best endeavours obligation, you cannot rely on the vagaries of a third party as a defence. An all reasonable endeavours obligation does not entitle a party to abandon performance of a contract once it becomes commercially undesirable or unprofitable. [2]

A reasonable endeavours clause is the least onerous, obliging you to take reasonable steps to achieve the goal, with your own commercial interests in mind.

Drafting tips:

Whichever obligation is used, an endeavours clause must be sufficiently certain. If the obligation itself is uncertain, any form of exhortation to achieve it will fail. An obligation to “use best endeavours to agree” is unenforceable, because it is an agreement to agree.  Consider whether you can stipulate the obligation by reference to the steps that have to be taken, for example, whether the party has to pay any costs, or incur expenditure; whether legal action is envisaged and if so, whether that includes an appeal; whether the party is allowed to put their own commercial interests first.

[1] IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335

[2] Jet2.com Ltd v Blackpool Airport Ltd [2011] EWHC 1529 Jest2.com Ltd v Blackpool Airport Ltd [2012] EWCA Civ 417

 

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Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.