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IS IT REASONABLE TO USE BEST ENDEAVOURS?

 

A party to a contract often tries to qualify its obligations or promises by saying that it will use reasonable endeavours to do something.  The other party frequently reacts by asking for an undertaking to use best endeavours. 

 

The general view is that an obligation to use best endeavours is more onerous than an obligation to use reasonable endeavours, but what do they actually mean? It's not an easy question to answer. In both cases you need to look at the surrounding circumstances - the circumstances when it comes to performing the contract and not the circumstances when you entered into the contract. That means that it is impossible to have a clear rule that will apply in all circumstances; each case will depend on the circumstances.  This really is a situation where lawyers can legitimately say: "it depends".

 

If you say you will use best endeavours, you are agreeing to do everything in your power, i.e. to take the steps a prudent, determined and reasonable person, acting in his own interests and wanting to achieve the desired result, would take. You can look at the costs and the difficulties involved in performing the contract and at what is commercially practicable; you do not have to bankrupt your business or do something that is obviously not going to succeed in order to honour your undertaking.

If you say you will use reasonable endeavours, you may look at all commercial considerations, including the costs of honouring the undertaking, your reputation, your relations with other parties and the uncertainties and practicalities of complying with your obligation. You need not honour the obligation if you would suffer a financial or commercial disadvantage; you are not obliged to sacrifice your own commercial interests.

 

If this looks confusingly like promising to use best endeavours, that is because it's not easy to distinguish between the two.

 

If, however, you promise to use reasonable endeavours and set out specific steps that you will take, you must take those steps even though they are not in your commercial interests.

 

Does it matter whether you promise to use reasonable endeavours or all reasonable endeavours?  

 

There may be more than one reasonable course to take. If there is more than one course, a promise to use reasonable endeavours obliges you to take only one of them.  A promise to use best endeavours probably requires you to take all the reasonable steps you can. An obligation to use all reasonable endeavours may, in some circumstances, mean the same as a promise to use best endeavours, but in other circusmtances may mean the same as a promise to use reasonable endeavours. 

 

Most people use all reasonable endeavours when they are trying to strike a compromise, somewhere between reasonable and best endeavours, without knowing exactly what that compromise is or means.

 

It's increasingly common to see the words reasonable commercial endeavours, especially in contracts that come from the US, but the meaning of these words is even less certain. There is no need to insert the word "commercial" in a contract made under English law because commercial considerations are taken into account in any case if you promise to use reasonable endeavours.

 

The meaning of phrases such as best and reasonable endeavours depends on how the courts have interpreted contracts in the past, and there is a long history of legal argument over the meaning of these expressions.  Their interpretation varies from jurisdiction to jurisdiction, so be particularly careful when entering into a contract under a different system of law; the same words may have a rather different meaning.

 

It's better to have certainty in a contract by stipulating the steps the parties will take, rather than to use words such as reasonable endeavours or best endeavours and then find that you have a protracted argument about their meaning.

 

Contact Details

 

If you would like further advice about any of the issues considered above please contact Christine Reid on 01865 864195 or email her at christine.reid@northwoodreid.com

 

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This article is not intended to be, and should not be taken as being, as legal advice. The law often changes and it varies from jurisdiction to jurisdiction; the information in this article is generic in nature and specific legal advice should be taken before acting on any of it.

 

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