Many commercial contracts contain a so-called ‘endeavour’ clause where a party is expected to do something to fulfil an obligation under a contract or bring about a certain outcome - rather than be strictly obliged to a perform a certain/specific action.
The wording of such clauses differs, and ‘best endeavours’, ‘reasonable endeavours’ and ‘all reasonable endeavours’ are all widely used. As there is no set statutory definition of these terms in existence, it can at times lead to confusion and disputes between the parties, and quite often whether or not one the parties has breached an “endeavour” clause will very much depend on the facts of each case.
The recent High Court case of Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd [2021] EWHC 3015 (Ch) sought to clarify the meaning of some of the common contractual terms and, in this instance, the failure to fulfil an “endeavour” clause resulted in a very costly outcome for the land owner who was liable to pay a contractor damages in the sum of £13.4 million for loss of opportunity to enter into a conditional contract.
The full facts of the case are reasonably complex, but it will suffice to say that the parties entered into an agreement which required them to use ‘all reasonable endeavours’ with a view to eventually entering into a binding conditional contract for sale and development of some land.
There had been several delays in the negotiations and the conditional contract had not been entered into by the end of 2017, at which point the Claimant (developer) issued court proceedings for breach of the original agreement, in this instance being Heads of Terms (it is worth nothing that whilst in this case it was accepted that the Heads of Terms was a binding agreement, in many cases the Heads of Terms are agreed subject to contract and are not binding).
The Court held that the Defendant/landowner had not, in fact, used all reasonable endeavours in this instance.
The judgment in the case contains helpful commentary on the meaning of the commonly used “endeavour” clauses, specifically, the following three types:
1. Using “Reasonable endeavours” simply means that if a reasonable path is taken, then the obligation is discharged.
2. “All reasonable endeavours”, in the words of Hugh Sims QC: “This is normally interpreted as requiring all reasonable paths or actions to be exhausted”.
3. The meaning of “Best endeavours” was said to be similar to ‘All reasonable endeavours’ but, in the judge’s words, may, require, depending on the context, the sacrifice of some commercial interests on the part of the party. In effect, in appears that ‘best endeavours’ is a slightly more onerous obligation.
The judgment further clarifies that where ‘all reasonable endeavours’ wording is used, inactivity or passivity will likely be in breach of such a clause. The Court will also look at whether the taking of a particular path is a reasonable endeavour, based on the likelihood of achieving the desired result.
Ultimately, the Court reiterated that despite those clarifications, the interpretation will still depend on the context and precise wording of the clause and the facts in each case. Nevertheless, the case provides a useful guide to most commonly used “endeavour” clauses which the parties and their lawyers should keep in mind when negotiating commercial agreements.
For more information on this article, please contact Irina Apekisheva by email on iapekisheva@jpclaw.co.uk by telephone 020 76644 7283 or connect with her on LinkedIn.
