The phrases "use reasonable endeavours" or "use all reasonable endeavours" are firm favourites with those who draft contracts, whether relating to property or not. Occasionally, the phrase "use best endeavours" is used, but much less frequently due to concerns as to how much it might cost to do one's very best.
At the heart of the debate is the extent to which the person with the contractual obligation in question is entitled to take into account his or her own financial interests.
Although the meaning of such phrases has been analysed in a number of cases decided by the English courts over the years ( click here for our e-update of 9 August 2010), litigation in the Scottish courts has been rare. The recent decision of the Outer House of the Court of Session in the case of Mactaggart & Mickel Homes Limited -v- Charles Hunter and Mrs Sandra Hunter is therefore welcome in providing some Scottish judicial guidance on these phrases.
Mr & Mrs Hunter owned a site with potential for residential development. They entered into missives with Mactaggart & Mickel Homes Limited (M&M) for the sale of the site. The missives required M&M to use "reasonable endeavours" to obtain planning permission. A dispute arose as to whether M&M had used reasonable endeavours.
The judge (Lord Hodge) decided that:
- "reasonable endeavours" is not as onerous as "all reasonable endeavours" which is itself less onerous than "best endeavours".
- a "reasonable endeavours" obligation does not require the person to disregard his/her own commercial interests. The question in this case was what would "a reasonable and prudent Board of Directors, acting properly in the interest of their company and applying their minds to its contractual obligations, have done to try to obtain the planning permission."
- it must be a question of fact in every case.
Persons who are negotiating contracts must be careful to select the appropriate language and, if possible, thought should be given to spelling out in the contract which steps should be taken, rather than relying entirely on a "reasonable endeavours" obligation, albeit circumstances in most cases make a fully prescriptive approach impossible or risky. Similarly, the person with the obligation to perform under the contract might wish to list steps which will not be required of that person.
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.
