Endeavours Obligations

Introduction

The terms "all reasonable endeavours", "reasonable endeavours" and "best endeavours" are regularly used in the drafting of commercial agreements and contracts. Despite this widespread use, the actual obligations imposed by each of these terms are unclear. Recent UK case law has provided further guidance on the obligations imposed by parties contracting to use "all reasonable endeavours". This article will look at that recent case law and will also briefly highlight the obligations imposed by the terms "all reasonable endeavours", "reasonable endeavours" and "best endeavours".

All Reasonable Endeavours – Case Law

CPC V QD1 involved a joint venture between the parties in order to develop a site in London. The parties entered into a sale and purchase agreement under which QD owed CPC various continuing obligations, including one to use "all reasonable but commercially prudent endeavours" to enable the achievement of various threshold events and payment dates (as defined in the sale and purchase agreement). For various reasons, QD withdrew the planning application to redevelop the site which resulted in a delay of one of the payment dates under the sale and purchase agreement. As such, the question arose as to whether this withdrawal constituted a breach of the obligations of QD to use "all reasonable but commercially prudent endeavours".

Counsel for CPC relied on an earlier decision2 where it was held that "it may well be that an obligation to use all reasonable endeavours equates with using best endeavours" when expressing the view that an obligation to use all reasonable endeavours equated with an obligation to use best endeavours so that a party must, if necessary, subordinate its own financial interests to obtain the desired result. Vos J however preferred to rely on the reasoning in the decision of Yewbelle Limited v London Green Developments [2007] EWCA Civ 475 where it was held that the obligation to use "all reasonable endeavours" does not always require the obligor to sacrifice his commercial interests.

In CPC V QD the interpretation of the phrase "all reasonable endeavours" was assisted by the use of the additional wording "but commercially prudent endeavours" in the sale and purchase agreement. The inclusion of these words was held to permit QD to consider its own commercial interests alongside those of CPC, and to require it to take all reasonable steps to procure the planning permission provided those steps were...