"Endeavours" clauses (clauses under which a party agrees to try to bring about a particular occurrence) feature regularly in commercial contracts, and have the effect of rendering obligations less onerous for the party undertaking them.
There are various strengths of commonly used endeavours clauses, ranging from "best endeavours" at one end of the spectrum to "reasonable endeavours" at the other, with "all reasonable endeavours" appearing to feature somewhere in-between as a compromise position between the two.
In the current economic climate the need to minimise risk has become more important than ever, and to this end, we have seen a noticeable increase in discussions of endeavours clauses when negotiating construction documents.
But what do the different wordings of endeavours clauses actually mean for both the party undertaking the contractual obligation and the party to whom the contractual obligation is owed?
Rather unhelpfully, case law on the subject has not produced clear guidelines as to the level of effort which will satisfy each type of endeavours clause; in fact, the most recent Court of Appeal decision on the matter, Jet2.com Limited v Blackpool Airport Limited reinforces the position that an endeavours clause in one contract may not mean the same thing in another, and that its meaning will depend on the particular facts of the case.
Despite this, some key features of the above mentioned endeavours clauses can be summarised as follows:
- Reasonable endeavours: the obligated party may have to incur some cost, but should not be required to sacrifice its own commercial interests in using reasonable endeavours, and the number of reasonable courses of action a party is required to take is likely to be limited (potentially to only one reasonable course of action).
- Best endeavours: a party may be obligated to take the same steps it would take if it was acting in its own interests, even if these involve significant expenditure (although given that no endeavours clause is absolute, a party would not be expected to take steps which would result in the demise of its business/completely disregard the interests of its shareholders).
- All reasonable endeavours: probably a middle ground between "best" and "reasonable" endeavours, although the meaning of "all reasonable endeavours" is the least clear; it may involve exhausting all reasonable courses of action without necessarily sacrificing commercial interests.
The parties' intentions in respect of any endeavours clause (e.g. which measures the parties anticipated would have to be taken in order for the obligated party to discharge its responsibilities, as well as those it would not be expected to take) will be assessed at the time of contract formation; it is therefore worth taking some time to consider this at the outset of any transaction. Whether or not the requirements of an endeavours clause have actually been fulfilled will be assessed at the time of performance of the contract.
In order to avoid some of the ambiguities/uncertainties associated with endeavours clauses, we would suggest stricter drafting of agreements whereby the lengths the obligated party will be expected to go to to discharge its responsibilities under a contract (as well as those it will not be expected to go to) are expressly provided for within the contract. To this end, endeavours clauses are frequently qualified to exclude a party from having to instigate legal proceedings for example, or by making steps to be taken subject to obtaining a favourable opinion from a QC.
Ultimately, where it is imperative that a particular objective is achieved, it is likely to be preferable to insist upon an absolute obligation being placed on the other party.
Another point raised in Jet2.com which is important to bear in mind when considering endeavours clauses is that the underlying objective to which the "endeavours" relates must be sufficiently certain; if it is not, the obligation to endeavour to achieve the objective will fail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
