Endeavour to do

When documents are being drafted, particularly contract documents, there is often a big debate about the level of endeavours a party is to use to fulfil its obligations under the agreement. Our agreements will often “use reasonable endeavours” or “all reasonable endeavours” but rarely use “best endeavours”. However, what do these phrases really mean? There is always a degree of uncertainty about what is really meant and such phrases must be quite clearly aligned to what the intentions of the parties are at the time of the transaction, in particular what resources a client has at its disposal to discharge those obligations. It may be useful to consider each of these phrases in turn. Sometimes in revisiting a phrase or concept it serves as a reminder of what the concept was really intended to cover.

Reasonable endeavours
Reasonable endeavours are quite clearly a lower level of endeavours than best endeavours. However exactly what does it entail if a party agrees to use reasonable endeavours? Does it mean looking at several courses of action and then deciding which is the best course of action to take? Does it mean embarking on a course of action and following it through to the end? I think not. The party carrying out the obligations is probably only required to take one course of action and then to see it through to the end rather than many different courses of action. However that party will not be obliged to sacrifice its own commercial interest in carrying out those obligations. Reasonable endeavours are therefore a bit of a balancing act with the interests of the obligor being a relevant factor in determining the extent of the obligations. I always think of reasonable endeavours as finding a good course of action and seeing it through as far as you can, but not to financial ruin.

All reasonable endeavours
All reasonable endeavours are perhaps the most unclear of all of these phrases since it sits somewhere between reasonable endeavours and best endeavours. The common assumption is that the level of obligations sits somewhere in the middle between reasonable endeavours and best endeavours. However, compared to best endeavours what is the real difference? All reasonable endeavours does imply taking more than one route as apposed to just looking at one option, but there is no real clear authority on this. In one case, comments were made to the effect that an obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course and not all of them, whereas an obligation to use best endeavours probably requires a party to take all of the reasonable courses he can. Therefore in some cases it may be that an obligation to use all reasonable endeavours equates to using best endeavours.

However, perhaps the distinction is really the consideration that must be given by the obligor when deciding which course of action to take. I think that all reasonable endeavours would undoubtedly mean that various options have to be considered but not all of those have to be explored or followed through by the party using such endeavours. I often think of all reasonable endeavours as looking at a number of different paths all pointing in different directions and then finally deciding to take the best one after a value judgement.

In a high profile case in 2010 (CPC Group Limited -v- Qatari Diar Real Estate Investment Company [2010] EWHC 1535 (ch) June 2010) the High Court got the opportunity to consider the meaning of an obligation to “use all reasonable but commercially prudent endeavours”. After considering the case law the judge decided that the obligation to use “all reasonable endeavours” does not require the obligor to sacrifice his commercial interests.  On the facts the judge held there was not a breach of the original obligation.

Best endeavours
As outlined above, we rarely draft any agreements with obligations which require the obligor to use best endeavours to carry out its obligations. In a 1980 case (IBM (UK) Limited v Rockwear Glass Limited) it was held that a contracting party which had agreed to use its “best endeavours” was required “to take all those steps in their power which are capable of producing the desired result being steps which a prudent determined and reasonable person acting in his own interests and desiring to achieve that result would take”.

While this is clearly an onerous obligation it is not an absolute obligation as there is implied a test of reasonableness. However, many would argue that best endeavours usually requires a party to do all that it can within its own power and financial pocket to fulfil an obligation, including the paying out of or expending of monies. It is also quite clear that it can impose an obligation to litigate, but probably not if the action is doomed to failure from the outset, but the obliging party would have to have obtained some evidence showing that there was no reasonable likelihood of the action succeeding.

In addition, best endeavours do not mean that the obligor needs to take itself to the wall or sacrifice its own company in carrying out those obligations. Nevertheless, clients are always reluctant to agree a best endeavours obligation as there is always the fear that it will require the expending of monies that the clients may not have at the time when it is attempting to carry out its obligations.

Such debates often occur when there is an obligation to obtain planning consent, where there is a fear that best endeavours could probably mean the implementation of a full planning appeal, even if this is by way of a public enquiry. In such cases it is always good practice to set out an individual definition of what the parties intend by the use of the words “best endeavours” if this is to be agreed.

In all cases, where these three phrases are being used, the best practice is always of course to set out your own tests within the agreement of what the parties intend by the use of these three phrases rather than leave this to debate at the time when the agreement is being implemented.