Just Give Me a Reason(able) - Boodle Hatfield

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02 Aug 2021

Just Give Me a Reason(able)

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5 min read

In almost all legal documents, obligations will be imposed on parties which require them to do something, or which prohibit them from doing something. The majority of the time, such an obligation will be imposed by virtue of an absolute provision, whereby it is clear how the party must perform in order for the requirement to be satisfied. A common example is where Party A must pay X pounds to Party B on an agreed date - it is clear that, if Party A fails to pay X pounds to Party B on that date, they will be in breach of their obligation. If these clauses are drafted carefully and properly, there will often be little scope for ambiguity.

However, other types of clause may simply require a party to use all reasonable endeavours to ensure that the obligation is satisfied. Some may require best endeavours to be used, and others may even simply require the use of reasonable endeavours. On the face of it, each these requirements (which we'll collectively refer to as 'endeavours clauses') appear to be very similar, and you could be forgiven for assuming that there is little difference between them, and little impact on the parties depending on which option is chosen. The reality, in fact, is that each has a different meaning and imposes various levels of onerousness on each party - thus dictating how hard they must 'try' in order to satisfy the requirement placed upon them - which ultimately could be make or break for a contracting party's success when trying to enforce a breach in the future.

Perhaps unhelpfully, none of the endeavours clauses have been defined in legislation, despite being widely used in the most common of legal documents. As a result, it has fallen to the Courts to determine how each of them should be interpreted. Both the lawyers negotiating documents, and the Courts overseeing disputes, have spent a significant amount of time paying close consideration to the different possible meanings of endeavours clauses.  

Applying the English language, it is straightforward enough to decide the order in which each of the endeavours clauses rank in terms of onerousness, with 'best endeavours' requiring the most effort, followed by 'all reasonable endeavours' in second place, with 'reasonable endeavours' coming in last, requiring the least effort. Just to keep things interesting however, this doesn’t necessarily mean that 'all reasonable endeavours' sits neatly halfway between the others… so let's consider what each of the endeavours clauses actually mean.

Whilst the Courts have already decided a number of cases relating to the use of the different endeavours clauses, some of the decisions have not necessarily been consistent. That being said, based on the decisions made so far, we now have an (albeit somewhat blurred) rule of thumb:

  • Best Endeavours - a requirement for a party to use their 'best endeavours' to achieve a desired outcome or perform an obligation means that they will need to take all of the steps that a prudent, determined and reasonable person would take in achieving the goal. This includes incurring financial expenditure (although not to the point of financial ruin), and if there are several reasonable ways of achieving the goal, you might need to pursue each avenue - save for any which will obviously lead to failure. In the case of Jet2.com v Blackpool Airports (2012), an airport operator had promised to use its best endeavours to promote a budget airline. The Courts decided that this included allowing that airline to operate outside the normal opening hours of the airport, even though this meant, in reality, the airport making a financial loss.
  • All Reasonable Endeavours - this is a slightly less onerous obligation, but still requires a party to pursue all reasonable avenues of achieving the goal, including possible financial expenditure - however (unlike with 'best endeavours') the party's own commercial interests can be taken into account as well, at least to some degree.
  • Reasonable Endeavours - being the least onerous of the endeavours clauses, a requirement to use 'reasonable endeavours' means that a party must pursue one reasonable avenue to achieving the desired goal, with their own commercial interests in mind. For example, in the case of P&O Property v Norwich Union (1994) an obligation to use reasonable endeavours to secure lettings did not extend to having to pay reverse premiums to tenants, which would have caused financial loss and therefore been damaging to the respondent's own commercial interests.

Regardless of these very general interpretations, the Courts are also quick to emphasise that clauses in legal documents will be considered subjectively in light of the facts of each individual case and, where possible of course, in accordance with the overriding original intentions of the contracting parties.

In addition to the above (and to add some further complication!), it is now becoming increasingly common for parties to propose additional or alternative wording to these endeavour clauses, such as requirements to use 'reasonable efforts' and to use 'all reasonable but commercially prudent endeavours'. It is ultimately a matter of negotiation between the parties to agree the wording that they would prefer to use, but it should be remembered that the more ambiguous the phrase, the higher the likelihood that the Courts will interpret the wording in a different way to how each party had originally intended for the obligation to apply.

In practice, lawyers often spend several hours each month negotiating over the use of endeavours clauses, and it is far better to be specific in drafting as to what steps a party must take in order to achieve their desired goal (if the usual clauses are not certain enough or don’t have the effect you are looking for). Any ambiguity could eventually be interpreted in a different way to one party's original intentions, whether or not that interpretation is considered to be reasonable… whatever that means. 

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