One of the many "golden rules" when negotiating commercial contracts is to avoid, wherever possible, agreeing to do or deliver something which isn't wholly within your control (as you could end up being sued for breach of contract through no fault of your own).
Often it simply isn't possible to avoid an undertaking to deliver something which isn't entirely within your control. In such circumstances, the solution which is often used is to provide for a party to agree to use either their "best" or "reasonable" endeavours to make sure something happens. The effect of this is to hopefully avoid a claim for breach of contract where the party who is subject to the obligation has tried to procure delivery of the item in question, but for reasons outwith their control it hasn't happened.
Even within these "endeavours" clauses, there are various levels of obligation which can be given, each of which can be subjective in interpretation (as what one party thinks using their "reasonable endeavours" will mean will not necessarily tally with what the other party thinks - particularly when their interests are competing). Examples of common wording include:
- "will use their best endeavours"
- "will use reasonable endeavours"
- "will use all reasonable endeavours"
- "will use all reasonable commercial endeavours"
These are just a few examples of the various permutations which are possible, and even when a clause has been negotiated in detail, parties can still end up in dispute. In the recent case relating to the redevelopment of the Chelsea Barracks site (which included the highly-publicised intervention of the Prince of Wales), the English High Court had to consider what level of obligation was imposed on a party who had undertaken to use: "all reasonable but commercially prudent endeavours".
The case included a helpful analysis of the difference between "best endeavours" and "all reasonable endeavours", as one party tried to argue that these were essentially the same, and that in particular they required the party under the obligation to subordinate its commercial interests to delivering the item in question.
The court concluded that, whilst it can depend on the circumstances from one instance to another, using "all reasonable endeavours" does not always require the party in question to disregard their own commercial interests. In this case the wording in the contract was even clearer, as the words "but commercially prudent endeavours" showed that it was clearly envisaged that the obligor was to be entitled to take their commercial interests into account.
This case serves as a useful reminder that, when entering into any contract, it is important to consider what you know you can and can't deliver, and where there's any dubiety you will want to be certain what your and the other parties' obligations are. The clearer the contract, the less likely you will end up in court down the line.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
