Obligations Qualified by the Requirement for Reasonable or Best Endeavours.© Daniel Atkinson 2007 05 April 2007Some standard forms of contract express obligations in terms of “reasonable endeavours” or “all reasonable endeavours” or “best endeavours”. Examples are
The distinction between the terms is not clear and particularly the extent of effort required from the Contractor in order to carry out the obligation so qualified. If the above terms are examined without reference to the contract, then a common sense commercial interpretation is that there is a spectrum of effort required and that “best endeavours” is at one end and “reasonable endeavours” at the other end. The textual interpretation is that the qualification does not require performance of the obligation to go beyond effort which would be adopted by a prudent and reasonable Employer acting in its own interests, since it would not be expected that a Contractor should do more. The qualification is not a guarantee of the result intended. The operative word is “endeavour” which means to try to do something or an effort to attain something. The effort is limited and does not require performance ignoring the Contractor’s own commercial interests. Several decided cases have examined the meaning of the terms in different situations and these are described below. Reasonable Endeavours to Agree In some situations the aspirations of the parties to reach agreement is expressed in terms of “best endeavours to agree”. There have been attempts unsuccessfully to argue that the term creates a level of certainty sufficient to establish an enforceable legal obligation. In Little v Courage Ltd [1995] CLC 164, Lord Justice Millett, giving the judgment of the Court of Appeal emphasised that adding the phrase “best endeavours” to the obligation to agree made no difference, it was still unenforceable. An undertaking to use best endeavours to obtain planning permission or an export licence was sufficiently certain and was capable of being enforced. An undertaking to use one's best endeavours to agree, however, was no different from an undertaking to agree, to try to agree, or to negotiate with a view to reaching agreement. All were equally uncertain and incapable of giving rise to an enforceable legal obligation. The Court of Appeal in Phillips Petroleum Co UK Ltd v Enron [1997] CLC 329 held that an obligation to use reasonable endeavours to agree did not preclude a party from refusing to reach agreement on grounds of commercial self-interest. In London & Regional Investments Limited v TBI plc [2002] EWCA Civ 355 it was held that an obligation to "use reasonable endeavours to agree the terms of a joint venture regarding Cardiff and Belfast Airports" was no more than an agreement to agree. It was therefore unenforceable. In Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2006] EWHC 1341 (TCC) Mr Justice Jackson held that the obligation that “the parties shall use reasonable endeavours to agree to re-programme the completion of the subcontract works and to agree a fixed lump sum and/or reimbursable subcontract sum for the completion of subcontract works …” was unenforceable relying on the above cases. Distinguishing Reasonable and Best Endeavours Although the difference in language suggests that the terms “reasonable endeavours” and “best endeavours” have different meanings, it is not clear what is the difference. The decided cases suggest that it is simply a matter of degree. The difference is the extent or number of the measures that have to be attempted, but in each case the nature of the measures is limited by the Contractor’s own commercial interests. Buckley LJ in IBM v Rockware Glass [1980] FSR 335 emphasised that the measure to be taken were subject to reasonableness. It was held that in the absence of any context indicating the contrary, an obligation to use best endeavours was understood to mean that the purchaser was to do all he reasonably can to ensure that the planning permission is granted. Mustill J in Overseas Buyers v Granadex [1980] 2 Lloyd's Rep 608 was doubtful that there was a difference between “reasonable endeavours” and “best endeavours”. It was observed that the words "best endeavours" in a statute or contract might mean something different from doing all that can reasonably be expected, although it was not known what the difference was. Rougier J in UBH (Mechanical Services) v Standard Life (1986) unreported appeared to consider that an obligation to use reasonable endeavours was less stringent than an obligation to use best endeavours. Kim Lewison QC in Jolley v Carmel Limited [2000] 2 EGLR 154 recognised that there was a spectrum of effort with reasonable endeavours at one end of the spectrum. In Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292 (Comm) Mr Julian Flaux QC concluded that the qualification of “reasonable endeavour” only required the performing party to take one reasonable course not all of those courses available. The qualification “best endeavours” on the other hand required the Contractor to take all the reasonable courses available. It was considered that there may be a number of reasonable courses which could be taken in a given situation to achieve a particular aim. An obligation to use reasonable endeavours to achieve the aim probably only required a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably required a party to take all the reasonable courses he could. In that context, it might well be that an obligation to use all reasonable endeavours equates with using best endeavours. The Effort Required to Discharge the Qualified Obligation. On the basis of the above authorities, it appears that the most onerous qualification to an obligation is to use best endeavours. The discharge of the obligation does not require expenditure of substantial sums, but sufficient effort reasonable in the circumstances taking into account the performing party’s own commercial interests, unless the contract expressly prescribes otherwise. In Terrell v Mabie Todd and Co [1952] it was held that a best endeavours obligation only required a party to do what was commercially practicable and what it could reasonably do in the circumstances. In Midland Land Reclamation Ltd v Warren Energy Ltd [1997] it was held that the best endeavours obligation was not the next best thing to an absolute obligation or guarantee. Kennedy LJ in the Court of Appeal in Phillips Petroleum Co UK Ltd v Enron [1997] CLC 329 said that it was impossible to say that the contract terms imposed on the buyer a contractual obligation to disregard the financial effect on him, and indeed everything else other than technical and operational practicality, when deciding how to discharge his obligation to use reasonable endeavours. If the obligation was to be straight-jacketed in that way, that would have been expressly stated. Lewison J in Yewbelle v London Green Developments [2006] EWHC 3166 (Ch) said that the essence of the obligation to use reasonable endeavours to reach an agreement, not with the other party to the contract, but with a third party a party was not required to sacrifice its own commercial interests. It was accepted that the obligation to use best endeavours required a party to go on using endeavours until the point was reached when all reasonable endeavours have been exhausted and to go on was the repeat the same matters again. That was subject to the qualification that account had to be taken of events as they unfolded, including extraordinary events. Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292 (Comm) Mr Julian Flaux QC agreed with the analysis Lewison J above subject to the caveat that where the contract actually specified certain steps had to be taken as part of the exercise of reasonable endeavours, those steps would have to be taken, even if that could on one view be said to involve the sacrificing of a party's commercial interests.
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