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Endeavours clauses are the polite fiction of commercial contracting: a promise to try without guaranteeing that the outcome will actually be achieved.
That can make perfect commercial sense. Regulatory approval may be outside a party’s control, a third party may need to give its consent, or performance may depend on events elsewhere in the supply chain. In these situations, an absolute obligation to deliver a particular result may be unrealistic. Instead, the parties agree on how hard the party must try to achieve it. The difficulty is deciding how hard is hard enough, depending on the wording you choose.
Recent English case law provides useful guidance on where these obligations begin and end. In particular, the Supreme Court has considered the limits of a “reasonable endeavours” obligation where contractual performance becomes difficult. So, when a contract says “reasonable endeavours”, “all reasonable endeavours” or “best endeavours”, what does the party actually have to do — and when has it done enough?
Why and how much to endeavour
An endeavours obligation is essentially a promise to try to achieve an outcome rather than guarantee it. It is often appropriate where the result depends partly on matters outside the performing party’s control.
English-law contracts commonly use formulations such as “best endeavours”, “all reasonable endeavours”, “reasonable endeavours” and “commercially reasonable endeavours”. They are often described as different levels of obligation, with best endeavours generally regarded as the most onerous.
But the meaning of an endeavours obligation depends on the wording of the contract, the nature of the obligation, the commercial context and the circumstances in which the obligation has to be performed.
What the four levels mean
“Best endeavours“
This is generally the strongest of the commonly used endeavours standards. In simple terms, it requires the party to take all reasonable steps within its power to achieve the required result. Essentially, the steps that a sensible and determined person in the same position, genuinely wanting that result, would take.
It is still not a guarantee of success. A party can use its best endeavours and still fail to achieve the desired outcome.
The reason businesses can be reluctant to accept this wording is that it can require them to take steps that are commercially unattractive. In Jet2.com Ltd v Blackpool Airport Ltd [2012] EWCA Civ 417, Blackpool Airport had agreed to use its best endeavours to promote Jet2’s low-cost services. The court found that this required the airport to accept flights outside its normal opening hours. The airport’s refusal was a breach of contract, even though operating those hours was commercially unattractive and caused the airport to lose money.
The case illustrates why a party should think carefully before accepting a best endeavours obligation, as it may require the party to put the contractual objective ahead of considerations that would ordinarily make a particular course of action unattractive. That does not mean, however, that best endeavours requires a party to do absolutely anything, regardless of the consequences. The obligation has limits and does not ordinarily require commercially ruinous measures.
The practical takeaway is simple: do not assume that “best endeavours” means “we will try our best, within reason”. It can require substantial effort and, in appropriate circumstances, commercial sacrifice.
“All reasonable endeavours“
This generally requires the party to take all reasonable steps available to achieve the contractual objective, but depending on the contract, it may still allow the party to take its legitimate commercial interests into account.
In CPC Group Ltd v Qatari Diar Real Estate Investment Co [2010] EWHC 1535 (Ch), the court considered an obligation to use “all reasonable but commercially prudent endeavours”, which indicated that the party was not required to sacrifice its commercial interests.
That does not mean the party can simply wait for the desired outcome to happen. An obligation to use all reasonable endeavours requires active effort. This was illustrated by Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd [2021] EWHC 3015 (Ch), where the court confirmed that an obligation requiring active endeavour could be breached by passivity.
In practical terms, “all reasonable endeavours” may require a party to pursue more avenues and take more steps than a simple reasonable endeavours obligation. But the exact boundary will depend on the contract and its commercial context.
This is particularly important when drafting. If the parties have a clear idea of what they expect the performing party to do, it is usually better to identify those actions than to rely solely on the phrase “all reasonable endeavours”.
“Reasonable endeavours“
“Reasonable endeavours” gives the performing party more flexibility. The party must take reasonable steps to achieve the required outcome, but does not necessarily have to pursue every possible option or sacrifice its own legitimate commercial interests.
The test is essentially objective: what would a reasonable and prudent person, properly considering the contractual obligation and acting in its own commercial interests, have done in the circumstances?
Relevant considerations may include:
- the cost of taking a particular step;
- the likelihood of success;
- the impact on the party’s business;
- its reputation;
- relationships with third parties; and
- competing commercial commitments.
In UBH (Mechanical Services) Ltd v Standard Life Assurance Company, TLR, 13 November 1986 (Q.B.), the court described the obligation in terms of balancing the contractual commitment against relevant commercial considerations. In practice, a party does not have to try every conceivable option or incur significant expense simply to achieve the desired result. What matters is whether it has made a genuine and reasonable effort.
Of the commonly used endeavours standards, reasonable endeavours is generally the least demanding. But “least demanding” does not mean optional. The party must still take positive and meaningful steps to comply with the obligation.
“Commercially reasonable endeavours“
Intended to dilute reasonable endeavours, this may achieve little, since reasonable endeavours already lets the promisor weigh its own commercial position. In Barclays Bank plc v UniCredit Bank AG [2014] EWCA Civ 302 acting in a commercially reasonable manner required only rationality, but in the context of exercising a contractual discretion, and the party could prefer its own interests entirely. Few counterparties will accept that for an obligation at the heart of the deal.
The Supreme Court’s limit: endeavours towards the bargain you made
A particularly important recent decision is RTI Ltd v MUR Shipping BV [2024] UKSC 18.
Sanctions prevented the charterer from making the US dollar payments required under the contract. The charterer proposed an alternative: to pay in euros and compensate the shipowner for any additional conversion costs.
The question was whether the reasonable endeavours wording in the force majeure clause required the shipowner to accept that workaround. The Supreme Court said no. The court drew an important distinction between taking reasonable steps to achieve contractual performance and requiring a party to accept different performance.
The shipowner had a contractual right to receive payment in US dollars. The reasonable endeavours obligation did not, without clear wording, require it to surrender that right simply because an alternative payment arrangement would solve the problem. If alternative performance, substitute arrangements or other workarounds are intended to be acceptable, the contract should say so expressly.
Drafting takeaways
1. Specify the steps where possible
The most effective way to reduce uncertainty is often to identify what the party must actually do. A detailed obligation is usually easier to understand and enforce than a vague promise to use “best” or “reasonable” endeavours.
2. Define the target as carefully as the effort
It is not enough to say how hard someone must try. Be clear about what they are trying to achieve. If partial, alternative or substitute performance is acceptable, say so.
3. Deal expressly with cost
If the party is not expected to spend more than a specified amount, consider including a cost cap. If significant expenditure is expected, that should also be clear.
4. Be clear about commercial interests
If a party should be allowed to take account of its own costs, reputation, relationships or competing commitments, consider saying so expressly. Conversely, if the intention is that the party must prioritise the contractual objective even where doing so causes a commercial disadvantage, that should be clear too.
5. Think about evidence
Endeavours disputes often come down to a simple question: what did the party actually do? Reporting requirements, regular updates and record-keeping obligations can therefore be valuable, as they create evidence of the steps taken, the alternatives considered and the reasons for decisions.
6. Do not assume the label will do the work
“Best”, “all reasonable”, “reasonable” and “commercially reasonable” are not magic words. The courts will consider the contract as a whole and the factual context. If a particular outcome, action or limitation is commercially important, it should be addressed directly in the drafting.
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.
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