Best endeavours, all reasonable endeavours and reasonable endeavours

10th February 2014

Best endeavours
A “best endeavours” obligation is the most onerous of the three levels of “endeavours” obligation. In the words of one old case: the term “best endeavours” “means what the words say; they do not mean second-best endeavours” [1]. A party should take steps which a prudent, determined and reasonable obligee (i.e. the beneficiary of the obligation), acting in its own interests and desiring to achieve that result, would take [2]. A party that has assumed a “best endeavours” obligation – the obligor – must exhaust all of a number of reasonable courses which could be taken in a given situation to achieve a particular aim.

This is not an absolute obligation, nor is it “the next best thing to an absolute obligation or a guarantee” [3]. A “best endeavours” obligation may require the obligor to incur expenditure [4]. However, depending on the nature and terms of the contract in question, the obligor may have some regard for its own commercial interests. This obligation does not therefore include actions which would lead to its financial ruin, undermine its commercial standing or goodwill [5], or have no likelihood of being successful. For instance, the obligor may be required to take the risk of success or failure in proceeding to litigate, but only where there is a reasonable prospect of commercial success.

All reasonable endeavours
The line between a “best endeavours” obligation and an “all reasonable endeavours” obligation can be a blurred one and it is too sweeping a statement to suggest that an “all reasonable endeavours” obligation is a half-way house between “best” and “reasonable” endeavours. Whilst an “all reasonable endeavours” obligation does not necessarily equate to a “best endeavours” obligation, in the context of the number of courses of action a party must take, there is some alignment between the two phrases. For instance, it appears that an “all reasonable endeavours” clause “requires you to go on using endeavours until the point is reached when all reasonable endeavours have been exhausted” [6] – which looks very much like a “best endeavours” obligation. However, there may be a distinction between the two concepts in terms of the commercial sacrifice an obligor has to bear.

In Yewbelle v London Green Developments it was held that the phrase “all reasonable endeavours” does not impose an obligation to outlay significant sums to resolve a commercial issue. However, a more recent case affirmed that the phrase suggested that the obligor should subordinate its own financial interests to obtain the desired result, with the judge explaining that this obligation does “not always require the obligor to sacrifice its commercial interests” [7]. Implicitly therefore (from the use of the words “not always”) there will be cases where an “all reasonable endeavours” obligation will require the obligor to sacrifice its commercial interests.

The only clear lesson from the case law on “all reasonable endeavours” is that the nature and extent of the obligation imposed in any given case is highly fact sensitive. How to tackle this uncertainty is considered below.

Reasonable endeavours
An obligation to use “reasonable endeavours” means that a party should adopt and pursue one reasonable course of action in order to achieve the desired result, bearing in mind its own commercial interests and the likelihood of success, and which need not be exhaustive of every course available to it. This is a notably lesser obligation than an “all reasonable endeavours” obligation.

This obligation does not require the taking of an action insofar as it disadvantages the party under the obligation. However, this is subject to the exception that if the contract specifies that certain steps have to be taken in performance of the obligation these steps must be taken even if they involve the sacrificing of a party’s commercial interests.

The use of “reasonable endeavours” is defined by reference to an objective standard of what an ordinary competent person might do in the same circumstances and implies a reasonable balance to be struck between a party’s obligation to others and its own financial interests [8]. Relevant considerations may well include:

• the party’s relations with third parties
• the party’s reputation
• the party’s financial interests and the cost of the course of action
• the chances of achieving the desired result.

There might 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 requires a party to take one reasonable course, not all of them.

Conclusion
Given the uncertainty as to what an endeavours clause may actually require in any given case, a sensible course will often be to define precisely the extent and nature of the obligation, such as:

• the extent to which the obligor should incur any expenditure (if at all)
• the extent to which the obligor should keep the obligee informed as to its progress
• the extent to which the obligee may be entitled to insist upon a particular course of action, or assume responsibility for pursuing the desired objective itself
• the end date by which the desired objective is to be achieved
  listing specific steps that the obligor is or is not expected to carry out.

This will, of course, achieve the unwanted result of adding to the length of the contract. Nonetheless, given the uncertainty as to the meaning of the different “endeavours” obligations, this is a cross usually worth bearing.

It will also be best practice for the obligor to keep a record of the steps it has taken to comply with the obligation.

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[1] Sheffield District Railway Co v Great Central Railway Co [1911] 27 TLR 451
[2] IBM United Kingdom Limited v Rockware Glass Limited [1980] FSR 335
[3] Midland Land Reclamation Limited v Warren Energy [1997] EWHC 375 (TCC)
[4] Jet2.com v Blackpool Airport Ltd [2012] EWCA Civ 417
[5] Rackham v Peek Foods Limited (1990) BCLC 895
[6] Yewbelle v London Green Developments [2007] All ER (D) 379 (May)
[7] CPC Group v Qatari Diar Real Estate Inv Co [2010] All ER (D) 222 (Jun)
[8] Rhodia International Holdings v Huntsman International [2007] 2 All ER (Comm) 577