The Court of Appeal recently reviewed an agreement where the developer was obliged to use "reasonable endeavours" to resolve matters with third parties prior to the longstop date. Matters had not been resolved within the 10 year period, so an "Acceptable Planning Permission" had not been obtained and therefore the developer argued that an overage payment of £1.4 million was not triggered. The Court of Appeal considered whether the developer had used "reasonable endeavours" to resolve matters.
The developer argued that in using "reasonable endeavours" it was entitled to have regard to its own profitability and its ability to procure funding.
The Court held that the structure of the interplay of the contracts, including the conditionality that one contract had on another had created the difficulty in procuring funding. This structure was of the developers own making and therefore, the constraints it had created on obtaining funding was self-imposed. The developer was in breach of its obligation to use "reasonable endeavours" and was ordered to pay a sum equivalent to the overage amount plus interest.
When satisfaction of a condition is within the control of one party, in the event of a dispute, the Court will look closely at how parties perform in order to satisfy the obligation to use "reasonable endeavours" or to comply "as soon as reasonably practicable".
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