Best Endeavours, Reasonable Endeavours, and All Reasonable Endeavours
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Best Endeavours
Best endeavours impose the highest level of commitment on the obligated party. When a party agrees to use best endeavours to achieve a specified outcome, he is expected to take all reasonable and practical steps that a prudent, determined, and reasonable person would take under the same circumstances, even if it requires significant resources. For example,
The Contractor shall use its best endeavours to obtain the necessary permits for the construction project within six months from the date of signing this agreement.
Although best endeavours do not compel a party to act in a way that is commercially ruinous or irrational, it does require him to make substantial effort and potentially sacrifice some of his interests to meet his obligation.
The courts have generally interpreted best endeavours as a strict standard, one that requires the obligated party to go as far as he reasonably can without jeopardising his business. This means pursuing every practical course of action that a reasonable, determined, and diligent person in similar circumstances would take to achieve the result. However, there is no expectation to go beyond reasonable bounds or suffer excessive losses.
In IBM United Kingdom Limited v Rockware Glass Limited CA [1980] , the Court of Appeal explained that best endeavours would require a party to take all those steps in his power which are capable of producing the desired results, as if the other party was carrying out the obligation himself. This standard of commitment can require a party to act in a manner which goes against his own commercial interests to meet his obligation. In Jet2.com Ltd v Blackpool Airport Ltd [2012], the court further explained that this standard of commitment may require the obligated party to take steps even if he may suffer a loss as a result.
When including best endeavours in a contract, it is advisable to outline what specific steps may be required, such as meeting certain deadlines, maintaining a communication log with relevant authorities, or consulting industry experts. This can reduce the risk of disputes over whether the obligated party has fulfilled their commitment. Without such guidance, a best endeavours clause can lead to differing interpretations and potential litigation.
Reasonable Endeavours
Reasonable endeavours are a more flexible standard than best endeavours and allows the obligated party to balance the specified obligation with other legitimate business interests. This contract term generally requires the party to pursue at least one reasonable course of action, but he is not obligated to exhaust every possible avenue or to incur excessive costs. For example,
The Supplier shall use reasonable endeavours to ensure delivery of goods within 14 days from the date of order.
Essentially, reasonable endeavours require a party to act in good faith and make a sensible effort toward achieving the outcome, as long as it does not place undue burden on his other business activities.
The courts typically view reasonable endeavours as an expectation to act in good faith and take sensible steps without imposing excessive demands. This interpretation is context-dependent, taking into account factors such as the nature of the business and the specific circumstances. Importantly, reasonable endeavours allow the obligated party to limit his efforts if pursuing the outcome would conflict with other practical business interests.
In Rhodia International Holdings Limited v Huntsman International LLC [2007], the court explained that an obligation to use reasonable endeavours is less onerous, and only requires an obligated party to take one reasonable course of action, rather than all possible courses of action. In Dany Lions v Bristol Cars [2014], the court clarified that the obligated party can do no more that what a reasonable step would requires him to do.
For contracts involving reasonable endeavours, it is helpful to specify particular actions or constraints that the obligated party might consider. For example, a contract could specify that reasonable endeavours do not require the party to incur costs beyond a certain threshold. This helps set clear expectations and minimises ambiguity, making it easier for both parties to understand the level of commitment required.
All Reasonable Endeavours
All reasonable endeavours are a middle ground between best endeavours and reasonable endeavours. It requires the obligated party to go further than reasonable endeavours by exploring multiple avenues to achieve the result, but it does not demand the exhaustive pursuit of every reasonable option as best endeavours might. For example,
The Licensee shall use all reasonable endeavours to secure financing for the development project within 12 months from the date of this agreement, including approaching multiple lending institutions and exploring alternative financing options.
In practice, all reasonable endeavours means the party should take more than just a minimal approach and may need to balance competing interests to some extent, though not to the degree of prioritising this commitment over all others.
All reasonable endeavours requires a high level of effort, but the obligated party is not expected to act irrationally or to sacrifice significant business interests. The courts interpret this standard as requiring multiple reasonable steps but recognise that some options may still be impractical or too costly to pursue.
In CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010], the court explained that an obligation to use all reasonable endeavours does not always require the obligated party to sacrifice its commercial interests. In Astor Management AG v Atalaya Mining Plc [2017], the court held that an all reasonable endeavours clause did not require the obligated party to take reasonable steps at any cost.
All reasonable endeavours clauses are useful for situations where the obligated party is expected to make substantial efforts but cannot be expected to act irrationally or against their own interests. Specifying what constitutes all reasonable actions in the contract, such as the number of financing sources to be approached, can clarify expectations and reduce ambiguity.
In conclusion, incorporating 'best endeavours', 'reasonable endeavours', or 'all reasonable endeavours' into a contract provides flexibility but requires careful drafting to ensure clarity and enforceability. Without additional guidance or limitations, these terms can be open to interpretation, potentially leading to disputes. Specifying the scope of actions or costs associated with these obligations can help manage expectations and create a clearer framework for compliance.
