It is an essential part of negotiating documentation that obligations are assumed by the parties to it
Where those obligations require a party to achieve an outcome - such as landlord's consent or planning permission - caution is needed. Failure to perform that obligation will be a breach of contract, but the outcome is achievable only with the cooperation of a third party.
In practice, parties seek to protect the extent of their exposure by qualifying the extent of obligations they undertake. Rather than taking on an absolute obligation, a party may contract only to endeavour to achieve an outcome. Customary phrases are typically adopted, but parties remain at risk as the scope and meaning of these is uncertain.
This has been highlighted in the recent case of Jet2.com Ltd v Blackpool Airport Ltd, in which one of the parties contracted to use 'best endeavours' to promote particular services. The contract was not specific as to how this was to be done or what action was or was not required.
As a result, the dispute reached the Court of Appeal, which itself tried to interpret the obligation. In order to do so, the court needed to identify the outcome at which the endeavours clause was directed - were the parties sufficiently clear in what they were trying to achieve and how could that be measured? Without sufficient clarity on those points, the entire clause would have failed for uncertainty.
There are three types of 'endeavour' obligation in common usage - 'best endeavours', 'all reasonable endeavours' and 'reasonable endeavours'. The distinction between them is unclear. The Jet2.com case does not help to clarify the distinction, but does emphasise the uncertainties endemic in the use of them all.
It is generally thought that these obligations can be placed on a sliding scale, with 'best endeavours' being the most onerous, 'reasonable endeavours' the least stringent, and 'all reasonable endeavours' covering the middle ground. In practice, what each obligation will actually require depends on the other provisions in the contract and the surrounding commercial context
Ultimately, it is important to understand that as with any contractual term, clarity is important. If the aim of an endeavours clause, or the criteria by which it can be measured, are not sufficiently certain, it may not be enforceable.
What should you do?
The underlying objective of an endeavours obligation should be defined clearly and precisely.
You should consider what steps the relevant party should take and make express provision for it in the contract.
For example, should that party be required to?
- incur expenditure
- take legal action or appeal any decision
- pursue the objective for a limited period of time
- provide progress reports
- step aside and assist the other party to pursue the objective or
- take any specific steps
This level of detail at the drafting stage may mean slightly increased costs in the short term. In the longer term it should create greater certainty for the parties and avoid costly disputes.