Anyone involved in reviewing or negotiating contracts will have come across expressions such as “A shall use reasonable endeavours to do X” or “B shall use its best endeavours to do Y..” or something similar.  Whilst these expressions are commonly used, in our experience, the level of understanding of what they actually mean is not high.

Qualified obligation

The first, most important, point to make is that the overriding intention behind the use of such an expression is to reduce the level of the commitment being given. By way of illustration, if a term in a contract states “A shall do X by 30 January 2009” that is unqualified and if A has not done X by 30 January then they are in breach of contract.

If however the term stated either:

• “A shall use its reasonable endeavours to do X by 30 January 2009”; or
• “A shall use its best endeavours to do X by 30 January 2009”;

then if A does not do X by 30 January 2009 then he will not be in breach of contract unless the other party to the contract can also prove that A has failed to use his “best” or “reasonable” endeavours as applicable.

What will be apparent from this is that the effect of such provisions is to make the innocent party’s ability to make a claim against A if he does not deliver on time considerably more difficult and complex. 

The difference between “best” and “reasonable” endeavours

Case law illustrates that the use of "best endeavours" imposes an obligation to do all that can reasonably be done in the circumstances.

The case of Pips (Leisure Productions) Limited v Walton [1980] 43 P&CR 415 illustrates the point where the Court, in considering a contract by the parties to "use best endeavours" to complete a purchase by a given date said: "“best endeavours" are something less than efforts which go beyond the bounds of reason, but are considerably more than casual and intermittent activity. There must at least be the doing of all that reasonable persons reasonably could do in the circumstances".

In other words whilst it is a strong commitment it is subject to the concept of reasonableness and would not for example extend to taking steps which would substantially financially disadvantage the giver.    

Reasonable endeavours

It is clear from case law that the use of the words “reasonable endeavours” is less burdensome than “best endeavours”. In essence it means an obligation to take action but only to the extent that such action does not disadvantage the person making the commitment. In practice it is therefore likely that this means only a minimal effort is required. It does not require a party to do anything that would involve sacrificing its own commercial interests.

All reasonable endeavours

Court judgments have indicated that the commitment given in this expression, as you might expect, lies somewhere between “reasonable” and “best” endeavours.

Other variations 

There are other variations which you sometimes see such as:

• commercially reasonable endeavours
• reasonable commercial endeavours
• utmost endeavours

Our standard advice would be to avoid these if at all possible because it is less clear what they mean. If you have to use such expression, we would advise further detail where possible is included in the contract as to exactly what practical steps the person giving the commitment is obliged to make.

Practical advice

The implications from this analysis obviously depend on whether you are giving or receiving one of the above commitments. Their use does however create uncertainty as to the level of commitment being given. Consequently, if it is necessary to use one of these terms then you should consider, particularly if you are receiving this commitment, inserting further detail into the contract as to what practical steps must be taken by the giver.

Contact

If you any questions about this issue or any issues with your business contracts please contact Stephen Thomas on 01242 285855 or by email on steve.thomas@maitlandwalker.com