Commercial agreements often include obligations to use reasonable endeavours, and variations on that theme. The construction industry is no exception.
As these phrases are usually undefined there is scope for interpretation. We often see the question of the difference between the meaning of “reasonable endeavours” and “best endeavours” being put before the courts.
Until recently, some of the most up-to-date guidance came from Rhodia International Holdings v Huntsman International. This case helpfully clarified that a reasonable endeavours obligation is less onerous than a best endeavours one.
The courts have indicated that although best endeavours is not an absolute obligation, the party concerned needs to take all reasonable courses it can and this may sometimes (but not always) require it to ignore its own commercial interests. On the other hand, reasonable endeavours only requires the party to take one, rather than all, reasonable course of action. It would not be expected to sacrifice its commercial interests, except perhaps where a particular course of action is specified by the contract.
So far, so good. It makes sense that on the endeavours spectrum, “best” should require something more than “reasonable”. But this leaves another question – where does an obligation to use “all” reasonable endeavours fit in?
In Rhodia the court doubted that all reasonable endeavours was very much different to best endeavours, but it did not have to decide the matter on that occasion.
The latest authority to look at this issue is CPC Group v Qatari Diar Real Estate, which takes a slightly different view. The dispute related to the high-profile redevelopment of the Chelsea Barracks site. One of the issues considered was an obligation to use “all reasonable but commercially prudent endeavours” to obtain planning permission.
In considering this obligation, the High Court offered some helpful clarification. Apparently, an obligation to use all reasonable endeavours does not necessarily equate to a best endeavours obligation and does not always require the obligor to sacrifice its commercial interests. Luckily, the position in this case was clearer because the parties had expressly limited the all reasonable endeavours obligation by adding the “commercially prudent” wording. Therefore, it remains a matter of fact and degree in each case as to what the relevant obligation requires.
So, where does this leave a party who has signed up to an endeavours-type obligation? Whatever the exact meaning of the obligation in question, one thing that can help is keeping records to demonstrate the steps taken to comply with that obligation. The reported case law might not precisely set out what each type of endeavours obligation means, but the outcome of any case will frequently depend on whether the party can demonstrate that it has taken steps to comply with the obligations it signed up to.