Parties often qualify their contractual obligations by only agreeing to endeavour to achieve the stated outcome. The level of effort required is commonly described as ‘best’, ‘reasonable’ or ‘all reasonable’ endeavours. What do these terms require a party to do?
Case law does give some guidance and the meaning of these obligations have been considered in the recent Court of Appeal case of Jet2.com v Blackpool Airport Limited.
This is the most onerous. The courts have said that this requires a party “to take all those steps in their power which are capable of producing the desired results… being steps which a prudent, determined and reasonable [obligee], acting in his own interests and desiring to achieve that result, would take”.
It may require expenditure on behalf of the obligee but not to take action that would result in “the certain ruin of the company”.
For example, in the Jet2.com case an airport was required to open outside of its normal operating hours despite the fact the airport incurred a loss in doing so.
It has been suggested in a number of cases, including the Jet2.com case, that this means the same as “best endeavours”.
However, other cases such as CPC Group v Qatari Diar have suggested that the amount of commercial sacrifice required is less than for a “best endeavours” obligation and that it does not necessarily require an obligor to ignore its own commercial interests.
This is the least stringent and generally does not require a party to act against its commercial interests. While the contractual obligation is still of “prime importance”, it may be balanced against matters such as the party’s reputation, its relationships with third parties and the cost of the proposed steps to be taken.
Ultimately the steps required to comply with these obligations will depend on the contractual wording and the context. Indeed, the courts have specifically warned against extrapolating from other cases.
Steven Carey is a partner in the real estate, construction and engineering team at Speechly Bircham