Key Points: Although there's no substantive difference between
"best endeavours" and "reasonable endeavours",
you should still be careful when drafting and interpreting
Requirements for a party to use its "best" or
"reasonable" endeavours are regularly seen in a broad
range of energy and resources contracts. These provisions exist
because there is doubt over:
what the ultimate contractual objective is. For example,
endeavours clauses are found in sales agreements where there is no
particular sales target; and/or
whether the contractual objective itself can be achieved. In
this respect, endeavours obligations are regularly imposed in
relation to, for example, registrations of plans and permits or
approvals of transactions.
Early cases on the meaning of "best endeavours"
adopted a literal approach to the phrase which pivoted around the
characterisation of the word "best". In one matter, for
example, an English court held that "best endeavours"
"means what the words say; they do not mean second best
endeavours ... the words mean that [the promisor] must, broadly
speaking, leave no stone unturned".
Eventually, the courts adopted a commercial approach to the
interpretation of this phrase, moving away from the
"natural" meaning of "best", so that the
obligation did not "mean everything possible under the
sun", but involved a consideration of what a party could
reasonably do in the circumstances.
Recent Australian cases have continued to interpret
"reasonable endeavours" obligations using the same
approach so that, subject to the facts, and the intentions of the
parties, there appears to be no substantive difference between
"best endeavours" and "reasonable
Satisfying an endeavours obligation
Australian courts have considered the following factors when
determining whether or not a party has satisfied its endeavours
1. the nature of the responsibilities of the promisor, together
with its capacity and qualifications; and
2. the extent to which the promisor has attempted to honestly
fulfil its obligations, having regard to the contract as a
The second question essentially involves considering two
what reasonable steps would the promisor need to take to
achieve the subject of the endeavours obligation; and
what is a reasonable timeline for those steps, having regard
to the time when the subject of the endeavours obligation falls due
and the promisor's capacity and qualifications?
A few practical considerations flow from all of this which are
relevant to drafting or interpreting endeavours obligations.
Drafters may wish to refer to "reasonable
endeavours" to avoid the parties' having unrealistic
expectations about the obligations imposed on the promisor.
If one endeavours standard is intended, "best
endeavours" and "reasonable endeavours" should not
be used in the same agreement.
The parties should not only consider what, objectively, a
promisor should or should not reasonably do with respect to the
relevant obligation, but also what a promisor can or cannot do as
This is an important consideration, for example, for a
promisor who may find that the standard of its obligation is higher
because of its capabilities or experience because the parties
failed to , include specific criteria for the endeavours
The parties may consider setting out the kinds of actions the
promisor is expected to take, or not take, with respect to the
This can be achieved by inserting some criteria that go
towards defining the content of the endeavours obligation. For
example, the relevant contract may include an indicative timetable
of when certain activities are to take place, or if a party is
expected to incur expenses or commence litigation.
Alternatively, the parties may benchmark the expected
performance by an accepted or acknowledged standard, such as one
which is accepted in the parties' industry or is consistent
with their experience.
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