Endeavour Clauses: What's Best When Drafting An Agreement Or Contract?

1. Introduction

   The terms "best endeavours", "reasonable

   endeavours" and "all reasonable endeavours" are

   commonly used by solicitors in the drafting of agreements and

   contracts. When making use of these terms, it is key to have an

   understanding of their precise meaning and to also be aware of

   the obligations their inclusion place on

   clients.1

2. Best Endeavours

   The inclusion of the term best endeavours in a clause

   originally placed an onus on the obliged party to "broadly

   speaking, leave no stone unturned."2

   This very onerous obligation has been lessened somewhat over

   the years to allow for the concept of standards of

   reasonableness to be introduced into its meaning. What is now

   required is that a person must do "all that a reasonable

   person reasonably could do in the

   circumstances."3

   In other words, a party must take all steps in their power

   which "are capable of producing the desired

   result...", they must take all the steps a reasonable

   person "acting in their own interest and desiring to

   achieve that result would take."4

   An obligation to use best endeavours probably requires a

   party to take all the reasonable courses he/she can. They must

   act honestly, reasonably and make a positive effort to perform

   the relevant obligation.

   In the instance of a company the required standard is that

   of a "reasonable and prudent board of directors, acting

   properly in the interest of their company and applying their

   minds to their contractual obligations."5 In

   other words a company must do all that is reasonable in the

   circumstances.

   This obligation does not extend to a situation where a

   company should put itself at risk of financial ruin to fulfil

   its obligation.6 It does seem clear however that it

   should carry out such actions that are commercially practicable

   and incur any reasonable associated cost in order to fulfil its

   responsibilities.

   What amounts to best endeavours must be considered at the

   time of performance or breach of the undertaking and not at the

   time of the creation of the contract.7

3. Reasonable Endeavours

   The obligations imposed by the term reasonable endeavours

   are "appreciably less than (those imposed by) best

   endeavours"8 and can be satisfied by an

   "honest try" by the obliged party.

   If a company can show any practical, financial or other

   commercial disadvantage in proceeding with the obligation this

   could justify their failure to take positive action, as could

   the likelihood or lack thereof of being successful. Any

   disadvantage to the...