We often see the terms ‘reasonable endeavours’, ‘best endeavours’ and ‘all reasonable endeavours’ in contracts. They are used to soften the need for absolute compliance with a provision whilst still ensuring that the relevant party at least tries to do whatever is required. Whilst the terms may sound similar, the legal distinction and how hard the party has to ‘try’ is less evident without delving deeper.
To avoid ambiguity, the parties can instead include specific obligations in the contract, or express boundaries on what is required under an ‘endeavours’ clause. Even so, agreeing a contract which covers every outcome might not always be appropriate or even possible, so without more the courts will generally interpret an ‘endeavours’ clause in the context of the particular contract. As a result, there are no clear-cut rules when considering what amounts to ‘reasonable’, ‘all reasonable’ or ‘best’ endeavours. However, we can get some insight from the approach taken by the courts.
Reasonable endeavours
A reasonable endeavours clause is probably the least strict of the three. A person doesn’t need to take every possible reasonable course of action. They can balance the duty to use reasonable endeavours against relevant commercial considerations including the costs, uncertainties and practicalities relating to compliance with the undertaking. Whilst a person wouldn’t be expected to sacrifice their own interests, they can expect that some cost might be incurred in fulfilling the obligation.
Best endeavours
This is viewed as being at the opposite end of the spectrum to ‘reasonable endeavours’ – a more onerous obligation. Although it still doesn’t create an absolute obligation, as would the use of ‘must’ or ‘shall’, the party needs to take all steps in their power to satisfy the obligation (including incurring costs, which may be significant), but there is a level of common sense allowed. They wouldn’t be expected to completely undermine the commercial and reputational need of the business nor to incur costs so great they would lead to financial ruin.
All reasonable endeavours
Newest to the bunch, ‘all reasonable endeavours’ clauses add more uncertainty to the mix as there hasn’t been as much analysis of them in court. For years they have been viewed as a middle ground between reasonable and best endeavours. However, they have at times been viewed as almost indistinguishable from best endeavours.
In the hands of the court
In a recent significant authority on the obligation to use all reasonable endeavours (Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd and others), Hugh Sims KC agreed with previous case law in his High Court judgment. This suggested that the obligation to use all reasonable endeavours requires all courses of action to be exhausted, but is less likely to require sacrificing of commercial interests. On the particular facts of this case, the defendant had not been required to forego its own commercial interests, but to at least have regard to those of the other party.
Despite this clarification, the judgment itself is a perfect example of how varied the interpretation of this type of obligation can be. The judgment dedicated pages to determining whether specific courses of action had amounted to the defendant undertaking ‘all reasonable endeavours’. Amongst the detailed discussion, the judge himself summed up the issue in a phrase, stating at para.97: “the precise requirements will depend on the precise wording and context in which that wording arises.”
This is the crux of the problem with endeavour clauses: each clause requires interpretation by the courts of the particular facts in order to assess what would be reasonable in that case. So there will always be uncertainty unless the contract spells out the exact steps that need to be taken to satisfy the obligation or, at the very least, gives some guidance of what may and may not be required.