The Basics: Best, Reasonable And All Reasonable Endeavours - What Do They Mean?

What are the most common types of endeavours clauses?

Best endeavours - the most demanding obligation

Broadly speaking, a party is required to use no less than its best efforts to produce the desired results in the circumstances. This has been held to mean that such steps are all the steps which a prudent, determined and reasonable person, acting in their own interests and desiring to achieve that result, would take.

Although this is an onerous obligation, it is not regarded by the courts as an absolute one and is subject to reasonableness.

What are the key characteristics of a best endeavours clause?

Such clauses may require significant expenditure on behalf of the obligor and can require the obligor to act against its own commercial interests, for example appealing against a court decision, diverting material resources from elsewhere within the business, or taking all reasonable courses open to it, rather than just one. However the obligor is allowed to have some regard for its own commercial interests and is not required to take action that would ruin the business or result in the utter disregard of the interests of shareholders. It may be overridden by other duties. For example, an obligation on the directors of a company to use best endeavours to pass a resolution does not require the directors to give bad advice to the shareholders or continue to recommend the resolution once not in the company's interests. The obligation is viewed from the obligee's perspective and its interests but may consider the obligor's interests. Reasonable endeavours - the least demanding obligation

This requires the obligor to achieve an even balance between its contractual obligation to the obligee and the obligor's own commercial interests i.e. it is obliged to pursue a reasonable course to achieve the objective.

What are the key characteristics of a reasonable endeavours clause?

There are four key characteristics:

such clauses are considered from the obligor's perspective; only limited expenditure is required by the obligor and the obligor does not need to sacrifice its own commercial interests (for example, its relations with third parties, its reputation and the cost of taking the action itself); they are less stringent than best endeavours clauses but will still "bite" provided the clause is clearly defined and held to be enforceable; they may well only require a party to take one reasonable course of action, not all of them. All reasonable endeavours...