How hard do I have to try?
The recent case involving the Candy brothers’ claim against Qatari Diar Ltd – the Prince Charles case – gave us a little further insight into the often tricky question of the lengths to which a party must go to achieve a particular objective by agreeing to use “best” or “reasonable” or in this case “all reasonable but commercial prudent” endeavours.
Court decisions have led to the following broad characteristics of the different levels of “endeavours”:
“Reasonable endeavours” - The person who has to fulfil the obligation must take a reasonable course of action to achieve the specified aim, but not all reasonable courses of action. There is a common misconception that this does not include taking legal action to achieve the specified outcome but this is wrong. In some cases, a reasonable endeavours obligation could include issuing court proceedings.
“All reasonable endeavours” - The person who has to fulfil the obligation must take all reasonable courses of action to achieve the specified aim, but he is not generally required to sacrifice his commercial interests in doing so.
"Best endeavours” - The person who has to fulfil the obligation must take all reasonable courses of action to achieve the specified aim even if these are contrary to his own commercial interests. However, he will not be required to take any action which could lead to his financial ruin.
In the Qatari case, it was argued that a promise to use “all reasonable endeavours” was effectively the same as promising to use “best endeavours”, because the party must take all reasonable endeavours to achieve the particular outcome, including if necessary, to subordinate its own financial interests. The Court said “no”. The promisor had not agreed to do this, more especially because of the qualification by the words “commercially prudent”, but even if those qualifying words had been absent, the promisor was not promising to sacrifice its own commercial interest.
Despite this recent guidance, there is always a level of uncertainty as to what the person who has to fulfil the obligation must do. If the parties to the contract can foresee at the outset what action might be needed (eg. entering into a planning agreement or procuring a guarantor), this should be added to the relevant clause to make it clear.
Many of the court cases regarding “endeavours” clauses revolve around whether any endeavours were actually used at all (rather than the level of action required). The person who has to fulfil the obligation should keep a clear record of what action he has taken and why. This should aid him in any dispute as to whether or not he has complied with his obligations.
To speak to someone who can help with your commercial property matters call, email or request a call back from one of our specialist lawyers.
This article contains information of general interest about current legal issues. It does not give legal advice and specific advice should always be sought about your particular circumstances. We will be happy to assist.