Business contracts give contractual parties the opportunity to make commitments to each other. Some of those commitments might be absolute and specific, stating that a party will achieve a certain objective or will do a certain thing. This provides certainty as to exactly what is required from each party with no room for doubt.
However, this presents a risk to the party making the contractual promise – in business, as in life, there can be any number of curved balls that come our way. Sometimes, although there may be a clear intention that something will be delivered or achieved, unforeseen circumstances or factors unknown when a contract was drawn up can obstruct or delay the end goal.
This is where the concepts of “best endeavours” and “reasonable endeavours” can be helpful.
Such ‘endeavours’ clauses indicate the level of effort that a party must use to endeavour to meet their obligations, and therefore allow that party to avoid liability for breach of contract if the objective can’t be reached using that level of effort.
Whether you are the party making the commitment or the party receiving it, it’s important that you understand what ‘best endeavours’ and ‘reasonable endeavours’ are – and the differences between the two.
What’s are best and reasonable endeavours?
That’s a trickier question than it sounds, as there is no statutory definition of ‘best endeavours’ or ‘reasonable endeavours’,
Deciding whether a committing party has met its obligations under these terms is often a matter for the courts – so outcomes are based on interpretation and case law.
This uncertainty is not ideal for the recipient of a commitment made by the other party and where this is the case endeavours clauses should avoided wherever possible in favour of clear and enforceable commitments, but there are occasions where there is no alternative.
An obligation for a party to use ‘best endeavours’ is more onerous an obligation than ‘reasonable endeavours’. From previous legal decisions, it is possible to give some general guidance to differentiate the two – but outcomes will depend on circumstances including:
- What was anticipated when the contract was drawn up
- What the rest of the contract says
- The commercial context
What does best endeavours mean?
The best endeavours term means exactly that – the best you could possibly do in the circumstances. No room for second best here! The committing party must have taken all reasonable steps in their power to achieve the obligation.
This means they must have taken all the steps that a ‘prudent, determined and reasonable’ person would take to deliver on their obligations.
This may include them taking on additional expenditure to attempt to achieve their obligation, although the party can balance this with their overall financial position into account.
‘Best endeavours’ does not mean an absolute obligation come what may, or even an obligation to deliver the next best thing. It does not require the committing party to act in a way which would bankrupt their business, or to try to do anything which has no chance of success.
What does reasonable endeavours mean?
This term can be interpreted as ‘what a reasonable and prudent person would do in their own commercial interests’.
More so than in the case of best endeavours, the obligations to one person can be weighed against relevant commercial considerations such as cost, obligation owed to others, and the reputation of the committing party.
Reasonable endeavours is not a requirement to sacrifice commercial interests and ignore the impact of trying to meet the obligations on profit.
Neither is it a requirement to try anything more than is reasonable – or indeed to try everything that is reasonable. Of course, what is ‘reasonable’ is highly open to interpretation and if you can’t agree with your counter party as to what this means, and this becomes the subject of a dispute, it would be down to the courts to decide.
What other terms could be used?
Sometimes, the term ‘all reasonable endeavours’ is seen as a good comprise, and this may or not be the case depending on circumstances. Legal decisions around this have varied, so use this term with care.
Other potential wording you may see could include:
- Reasonable commercial endeavours. This is often used to soften a reasonable endeavours obligation, but in practice is not very different.
- Utmost endeavours. This is sometimes seen, but currently there is no helpful case law around this term, so it is difficult to say how effective it may be.
- Efforts. Sometimes ‘efforts’ may be substituted for ‘endeavours’ – however, this is unlikely to have any material effect on an outcome as both words mean the same thing.
When should endeavours commitments be used?
As we have seen, avoiding endeavours commitments is preferable where possible but in certain circumstances they can be useful to help reach agreement, especially when an absolute obligation is too much of a risk for either party.
Endeavours commitments should always be viewed in the context of the particular contract and obligation – if it does come down to a court, its decision will be made in this context.
