Endeavour clauses

08-07-2022


How hard to I need to try…?

Endeavour clauses in contracts are used where a party only has to try and fulfil an obligation in a contract.  There is no absolute requirement for them to fulfil the obligation at all cost. Consequently, compared to an absolute contractual obligation, a breach of an endeavour clause is not always clear.

There are three types of endeavour clauses: best, reasonable and all reasonable endeavours. However, the interpretation of each will vary and depending on the case, can have different meanings.

A clause requiring best endeavours will be the ‘next best thing’ to an absolute obligation. This is the most burdensome endeavours clause and whilst aiming to achieve the desired results, it requires steps of a prudent, reasonable and determined party. This could require some significant expenditure by the party that has agreed to use best endeavours. Significantly, it may require that party to take steps that do not align with its own commercial interests.

A duty to take reasonable endeavours will be less burdensome and will not usually require the party to sacrifice their own commercial interests.

All reasonable endeavours, whilst being most similar to best endeavours, is usually a compromise between the two and tends to be heavily based on the context of the situation. Whilst such an obligation will not usually require the party to sacrifice its own commercial interests, the 2021 case Brooke Home (Bicester) Ltd v Portfolio Property Partners Ltd recognised that subordination of those interests may be required in some cases.  In this case, the judge went on to explain that active endeavour is required where an obligation to use all reasonable endeavours applies – passivity and inactivity is likely to constitute a breach.

A failure on either party to fulfil their obligations in a contract will be a breach and uncertainty can be costly.  So whilst endeavour obligations have their uses, it will usually be in each parties best interests to try and be as precise as possible what steps they will be expected to take.  As the extent and effort that need to be made will be assessed on an each case basis, it may be helpful to set out examples of what will and will not be required – rather than an exhaustive list, so that context can be given to each parties’ expectations.


Karron Whitter

Partner
Commercial Property

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