Member Article

"Reasonable" and "Best" endeavours

With Watson Burton LLP Law Firm

It is common for commercial contracts to contain clauses where one party is required to use “reasonable” or “best” endeavours to perform a particular task or achieve a particular outcome. But what does “reasonable” and “best” endeavours mean?

Reasonable/best endeavours clauses must be distinguished from absolute obligations. Absolute obligations provide that a certain outcome must be reached otherwise there will be a breach of contract. Reasonable / best endeavours clauses provide that a party only needs to exercise reasonable / best endeavours in an attempt to achieve that outcome, usually where the result is dependent upon a third party.

That leads to the questions: what is needed to discharge an obligation to use reasonable endeavours and what is the difference between “reasonable” and “best” endeavours? There are a couple of recent cases that help us understand these obligations more clearly.

In Rhodia International Holdings Limited & anor -v- Huntsman International Llc [2007] EWHC 292, the court stated that “reasonable” and “best” endeavours places different levels of obligation on the party. “Best” endeavours is more onerous and probably requires a party to take all reasonable courses of action available to him whereas “reasonable” endeavours probably only requires taking one reasonable course, not all of them. On the other hand, the judge considered that “best endeavours” and “all reasonable endeavours” probably mean the same thing.

The court noted that a reasonable endeavours obligation does not normally require a party to sacrifice its own commercial interests in discharging its obligation. However, it was held that where a party has agreed to take certain steps as part of the reasonable endeavours obligation, then those steps will have to be taken in any event.

In Yewbelle -v- London Green Developments Limited [2006] Lawtel 8/12/2006, Mr Justice Lewisham held that an obligation to use “best” endeavours “requires you to go on using endeavours until the point is reached when all reasonable endeavours have been exhausted” so that to go on was merely to repeat the same matters again.

Businesses should take care when entering into contracts containing “reasonable” or “best” endeavours clauses, since there is often little clarity as to what exact steps need to be taken in order to satisfy the obligation. The cases provide little guidance in this area although it is quite clear that the courts are willing to enforce such obligations by inferring what steps a party ought to have taken in those particular circumstances.

If you have any queries relating to this article, please contact David Hankin at Watson Burton LLP on 0191 244 4444 or email david.hankin@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .