UK: "Best Endeavours" - To Act Against One’s Own Commercial Interests?

Summary

On 2 April 2012, in Jet2.com Limited v Blackpool Airport Limited the Court of Appeal delivered its decision in response to the appeal by Blackpool Airport Limited (the "Airport") against a ruling by the High Court holding that it had breached its contract with Jet2.com Limited when it refused to accept flights scheduled by Jet2 outside the Airport's usual operating hours. The Court dismissed the appeal (with one judge dissenting) stating that the obligation to use best endeavours in the contract between the parties was capable of giving rise to a legally binding obligation and obliged the Airport to do all it reasonably could to enable Jet2's business to grow. The promotion of Jet2's business extended to keeping the Airport open to accommodate flights outside its usual operating hours as this was crucial to Jet2's business as a low cost-carrier.

Background

Jet2 and the Airport entered into a contract on 23 September 2005 to govern the operation of Jet2 flights from and to the Airport for the next 15 years. Jet2 was obliged to begin flight services between Blackpool and Belfast and to base its aircraft at Blackpool as soon as practicable, and in accordance with growing demand. Jet2's first aircraft was to be based at Blackpool from March 2006. In return, the Airport agreed to promote Jet2's services from Blackpool, as well as provide ground services and marketing support for Jet2's business.

Following the execution of the contract, Jet2 operated flights to and from Blackpool for four years from March 2006, subject to the acceptance of flight schedules by the Airport. The Airport's usual opening hours were, as notified to the Civil Aviation Authority, between 7am and 9pm daily, although such opening hours were not set out in the contract. Airports are allowed to operate outside their usual opening hours, subject to notification to the CAA. During the four-year period, Jet2 operated regular flights to and from the Airport outside its usual opening hours.

However, due to the additional financial costs of keeping the Airport open outside of these hours, the Airport made significant operating losses since the execution of the contract and notified Jet2 on 22 October 2010 that it would no longer accept flights operated by Jet2 outside its usual opening hours. This meant that Jet2 had only one week to rearrange its flight schedule and forced Jet2 to divert two of its flights from Blackpool to Manchester at short notice.

The first instance proceedings

Jet2 commenced proceedings against the Airport and sought damages for breach of contract as well as a declaration that the Airport was obliged to accept Jet2 flights outside its opening hours for the term of the contract. To minimise the financial consequences of the Airport's decision, Jet2 successfully obtained an interim injunction (which was renewed until trial in March 2011) obliging the Airport to accept Jet2 flights over the 2010-2011 winter season in accordance with flight schedules that had been agreed for the winter season the previous year, which included flights operating outside of the Airport's usual opening hours.

At trial, the Court's decision centred on the following section of the contract:

"Jet2.com and [the Airport] will co-operate together and use their best endeavours to promote Jet2.com's low cost services from [Blackpool Airport]...and [the Airport] will use all reasonable endeavours to provide a cost base that will facilitate Jet2.com's low cost pricing."

The contract also provided that the Airport would contribute to Jet2's marketing expenditure, jointly promote Jet2's services from Blackpool Airport and:

"...arrange for prominent Airport advertising at [Blackpool Airport] of Jet2.com's low cost product and its destinations, together with frequent promotional facilities...and will facilitate editorial and news coverage of Jet2.com's activities in its magazines and with newspapers, all at no cost to Jet2.com."

Jet2 argued that the Airport was therefore obliged, by the contract, to use its best endeavours to accommodate Jet2 in accepting flights outside of its usual opening hours. However, the Airport maintained that its obligation to use its best endeavours to promote Jet2's low cost services was limited to advertising and marketing Jet2's services only and that it was under no obligation to accept flights outside its opening hours. In addition, the Airport argued that while using its best endeavours, it was entitled to consider its own commercial interests and any constraints thereon resulting from accepting such flights.

Although he allowed that the financial costs to the Airport for accepting flights outside normal hours were significant, the trial judge, Judge Mackie, found in favour of Jet2, ruling that the Airport breached the contract by refusing to accept Jet2 flights outside its usual opening hours, as it had previously done. It was held that the word "promote" meant "advance" generally rather than "advertise" and "market", and that the absence of an express clause stating that Jet2 could operate flights outside usual operating hours suggested that the parties thought it too obvious to include in the agreement.

Regarding the Airport's obligation to use its "best endeavours", the judge recognised that, for a low-cost airline, flexibility in scheduling early and late flights is paramount to ensure maximum utilisation of aircraft and to maintain its cost base. It was clear that both parties were also aware of this fact. Jet2 would also be limited by the slots that it could obtain for its summer destinations, for which there was great competition, and it would most probably only have access to slots outside peak hours. The trial judge also took into account the fact that other airlines, namely Ryanair and Monarch, were also operating flights from Blackpool outside the Airport's usual opening hours. He further held that "unforeseen delays are a fact of life in air travel", which required Jet2 to operate flights beyond the scheduled departure and arrival times to discharge its duty to its passengers.

However, the trial judge did not grant a declaration that the Airport continued to be obliged to accept flights outside its normal opening hours for the term of the contract, on the basis that the Airport was not unconditionally obliged to provide a low cost base for Jet2 and that any obligation to use "best endeavours" must be interpreted in the surrounding context.

The Airport appealed the first instance judgment.

The appeal

The appeal was heard by Court of Appeal judges Lord Justice Moore-Bick, Lord Justice Longmore and Justice Lewison (who dissented). The key issue on appeal was whether the obligation to use best endeavours to promote Jet2's business was legally enforceable and whether the obligation to accept flights outside opening hours was within the scope of the contract. The Airport argued in relation to both points in the negative, whereas Jet2 maintained that, due to the nature of the low-cost airline business, such obligation was in the contemplation of and taken for granted by the parties prior to the execution of the contract.

Moore-Bick LJ held that due to the scale of the investment involved in Jet2 building its business from Blackpool Airport, it was clear from the contract that the parties intended to enter into a binding agreement. Longmore LJ agreed, stating that, on the construction of the contract, it was clear that the parties thought that the agreement was contractually binding upon them. In addition, Moore-Bick LJ agreed with the trial judge that "promote" for the purposes of the contract should be interpreted to mean "advance" in a general sense. He also suggested that the cost base of Jet2's business was derived from the value it could extract from its assets, namely keeping its ticket prices as low as possible and obtaining maximum use of its aircraft.

Moore-Bick LJ also took the view (which was accepted by the parties) that "best endeavours" meant "all reasonable endeavours". He determined that, in order to be held as legally enforceable, the object of the endeavours must not be too uncertain to be capable of enforcement. From a review of the relevant case law, the meaning of "all reasonable endeavours" was determined to be a question of construction and to be considered on a case-by-case basis. Where there is no room in the contract for later negotiation of terms, an obligation is not conditional upon obtaining consent from a third party, and there is an intention to create legal relations, an obligation to use "all reasonable endeavours" is not too uncertain to be capable of enforcement. However, he did concede that, at times, it may be difficult to determine whether there has been a breach of such obligation.

Moore-Bick LJ therefore held that, pursuant to the obligation to use best endeavours to promote Jet2's low-cost airline business, the Airport was obliged to "do all that it reasonably could to enable that business to succeed and grow". The ability to schedule Jet2 flights outside usual opening hours was considered essential to Jet2's business and therefore essential to the performance of the contract. In accordance with such obligation, the Airport could not therefore refuse to perform the contract simply because it was not in its commercial interests to do so, particularly where performance of the contract was within its control. The parties could not be expected to have contemplated that the Airport could restrict Jet2 flights where it was in the Airport's commercial interests to do so. Longmore LJ agreed, holding that an agreement to use best endeavours by one party "pre-supposes that [they] may well be put to some financial cost" so that they cannot plead detrimental financial consequences to escape such obligation.

This is not to say that the Airport was expected to promote Jet2's business unconditionally, particularly in the event that it became clear that Jet2's services from Blackpool would be unprofitable. Together with the uncertainty of "future course of events", Moore-Bick LJ agreed with the trial judge to refuse to grant the declaration sought by Jet2 that the Airport must accept Jet2 flights outside of opening hours for the next 10 years, allowing the Airport the opportunity to terminate the contract in future following notification to Jet2 pursuant to the contract. The parties were unlikely to have contemplated at the time the contract was entered into that the Airport would be unconditionally obliged to accept such flights. It was on this basis that Jet2's argument in the alternative – that the Airport was estopped from rejecting flights outside usual opening hours – was dismissed.

The appeal was therefore dismissed. Lewison J, in a dissenting opinion, stated that he considered the object of the endeavours too vague, and that any term obliging a business to operate at a loss should be expressed in very clear terms, particularly where other obligations in the contract are set out in a detailed manner. He considered that the contract did not create a fiduciary relationship between the parties, requiring one party to consider the other party's financial interests superior to its own. He therefore held that the Airport did not breach the contract.

Conclusion

This case provides a warning of caution to persons entering into commercial contracts. Courts will, as in the above case, consider the meaning of terms on a case-by-case basis and it is of course therefore important to avoid using terms that are unclear. In particular, there is a risk in using "best endeavours" or "all reasonable endeavours" clauses in contracts, as this may lead to disagreements between the parties as to its meaning. In addition, the danger in using such clauses is that the party on which such obligation is imposed may be required to act to his financial detriment. It is therefore advisable that terms in commercial contracts be constructed to provide as much clarity as possible, even so far as avoiding "best endeavours" or "all reasonable endeavours" clauses and delineating the exact steps a performing party must take, so that the parties are fully aware of the scope of their obligations.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.