Endeavours

Where it is impractical to impose an absolute obligation upon a party to do or achieve something, the parties will often look to impose a lesser obligation in the form of either best or reasonable endeavours, but what's the difference?

Best Endeavours

Generally this is the highest of the obligations, second only to an absolute obligation. Basically, a party under a best endeavours obligation should spend whatever time and money it is reasonable to expend to discharge the obligation.

In Sheffield District Railway Co v Great Central Railway Co (1911) the judge stated that "best endeavours means what the words say, they do not mean second best endeavours". It is generally understood that a party under a best endeavours obligation must take all practical courses of action in order to discharge it.

All Reasonable Endeavours

Surprisingly, the addition of this one word "all", is apparently sufficient to render the obligation almost, if not precisely, akin to a best endeavours obligation.

In Hiscox Syndicates Ltd and Another v The Pinnacle Ltd (2008) it was held that an all reasonable endeavours obligation was to be considered the same as that of a best endeavours obligation. This followed Rhodia International Holdings v Huntsman (2007) and Yewbelle Ltd v London Green Developments Ltd (2007) where such a possibility had been entertained but not ultimately decided.

Reasonable endeavours

This is the most relaxed of the three alternatives, requiring the obligated party to only take one reasonable course of action from the courses open to it. The obligated party need not spend a "significant" amount of money or time discharging the obligation (following Yewbelle) and in making its decision, the obligated party need not do something which would disadvantage him commercially speaking (following Rhodia).

Despite the above guidance, what will and will not be considered reasonable is ultimately difficult to precisely determine as this will depend greatly upon the particular circumstances in which the obligation exists. Accordingly, if you wish to try and better clarify the position, you may want to consider setting out particular steps that an obligated party is to take in respect of certain key obligations e.g. how much money and time it is to spend, how many options it is to consider or take.

Alex Williams is a solicitor in the Michelmores Construction Team. For further information on this article, please contact Alex at alex.williams@michelmores.com or on 01392 688688.