What is required of an “endeavours” clause?
It is not uncommon for a contract to require a party to use its ‘best endeavours’, ‘reasonable endeavours’ or ‘all reasonable endeavours’ in meeting some form of duty. But what do these phrases mean and how can they affect the contracting parties?
‘Best endeavours’ is the most onerous of the obligations as it requires a party to ‘take all those steps in their power which are capable of producing the desired results… being steps which, acting in his own interests and desiring that result, he would take’. So a ‘best endeavours’ clause carries a significant risk-bearing obligation and could be commercially unwise. For example, in Jet2 (2012) Blackpool Airport was forced to sacrifice its own commercial interests by staying open outside its normal opening hours (despite incurring losses) having agreed to use its ‘best endeavours’ to promote Jet2’s low-cost airline service. The fact that it was loss-making did not prevent the obligation applying.
Further, ‘best endeavours’ can impose an obligation to litigate (or appeal a decision) as was the case in IBM v Rockware Glass Ltd (1980). In this case the court considered the meaning of a promise by one party to use its best endeavours to obtain relevant planning permission. It was held that this promise would include an obligation to appeal against an initial refusal of permission, so long as there was a reasonable chance of success.
On the other hand, ‘reasonable endeavours’ is less onerous as there is no obligation to sacrifice one’s own commercial interests, and the likelihood of getting the desired outcome is relevant in deciding what is ‘reasonable’. Moreover, if there are several courses of action available, it may be sufficient to merely take one of those (reasonable) steps. In P & O Property Holdings Limited & Others v Norwich Union Life Insurance Society (1994), the developer was subject to a ‘reasonable endeavours’ obligation to obtain lettings of a shopping centre. Norwich Union was entitled to a percentage of revenues and argued that P & O should have offered reverse premiums to attract tenants if that was part of good estate management.
The court concluded that on the wording, while the developer was under an obligation to use reasonable endeavours to obtain lettings, there was no separate obligation to use reasonable endeavours to agree the terms of the lettings. In short this is merely an obligation to pursue one course of reasonable action, and in deciding this, one can consider one’s own commercial interests (and need not include every available course of action).
‘All reasonable endeavours’ is an obligation that is best avoided because its meaning isn’t as tried and tested than the other two terms. In UBH (1986) it was said to be a middle ground, implying something more than reasonable endeavours but less than best endeavours, due to the element of reasonableness. Accordingly, there is a danger that it may be an obligation to take all reasonable courses of action (as opposed to one course of action; needed for reasonable endeavours.) However, the general view is that the obligation does not require a sacrifice of one’s own commercial interests. It therefore includes elements of both ‘best’ and ‘reasonable’ endeavours, but there is uncertainty as to which elements are included and is therefore best avoided.
