Every contract should have something to say about the lengths to which the parties must go in order to meet their obligations.

Some aspects – like service delivery – will usually be fundamental and so the requirement to comply will be absolute. Others – such as relations with third parties, governance and remediation – may be less clear cut. For commitments like these, it may only be feasible to “endeavour” to do what’s required.

 

I’ve written previously about the sliding scale of effort, from “reasonable endeavours” at one end, through “all reasonable endeavours” to “best endeavours” at the other (you can read that post here).

The arguments have recently been addressed again by the Court of Appeal in Jet2.com Ltd v Blackpool Airport Ltd (2011) EWCH 1529 (Comm), a case from last year which was only reported in April.

 

The key take-away is that a requirement to use “all reasonable endeavours” can operate to force a party to act contrary to its own commercial interests.

In this case the parties had signed an agreement in 2005 for flights to and from Blackpool Airport. The agreement was straightforward and the key clause said simply this: “Jet and BAL will co-operate together and use their best endeavours to promote Jet’s low cost services from Blackpool Airport and BAL will use all reasonable endeavours to provide a cost base that will faciliate Jet’s low cost pricing.”

All went well for the first few years. In particular, BAL allowed Jet to schedule flights outside its published operating hours (which were not mentioned in the agreement) so that it could run as many as possible each day.

However, when new owners took over BAL they decided it was uneconomic to keep the airport open for Jet’s additional flights and instisted Jet divert them elsewhere. The case turned on the construction of “best endeavours” and “all reasonable endeavours” (which, interestingly, the parties agreed should be treated the same) and whether BAL was entitled to put its own financial interests before that of its commitment to Jet.

The key points from the judgment are as follows:

1. •the extent to which a party who has agreed to use all reasonable endeavours can have regard to its own financial interests will depend on the nature and terms of the contract;
   

2. •the obligation to use best endeavours to promote Jet’s business required BAL to do all that it reasonably could to enable that business to succeed and grow, and this included keeping the airport open to accommodate flights outside normal hours even though this was financially detrimental;
   

3. •the initial intention of the parties could not have been for BAL to change what it did at short notice based on what profit it was making as a whole - its profits were affected not just by Jet’s flights but by various other problems it faced  and which it should have considered before entering into the agreement (it had in fact been loss-making since opening);
   

4. •a party under an obligation to use all reasonable endeavours cannot use cost or inconvenience as grounds for not doing something where performance is under its control and does not depend on cooperation from a third party.
   

The practical implications of the case are that if possible, rather than relying on generic drafting, parties should specify what steps each is required to take and when. 

When taking on an endeavours obligation, the obligor should look to exclude anything which might go beyond ‘reasonable’. 

It is always prudent to say so if an obligation is not intended to force a party to act against its own commercial interests.

Further practical guidance is included at the bottom of my previous post on this area, which you can read here.