Best endeavours or reasonable endeavours

Under English law, contracts often use terms such as best endeavours and reasonable endeavours when imposing obligations on a party. These terms set expectations about the steps a party must take to achieve a particular outcome. If an endeavours clause is poorly drafted, uncertainty can arise over the extent of the obligation and whether it has been fulfilled.

When negotiating a contract, it is important to consider carefully whether an endeavours obligation is appropriate. Where possible, clearly defined obligations and specific actions can provide greater certainty. If an endeavours clause is necessary, its wording should reflect the parties’ intentions and the level of commitment they are prepared to accept.

Why are best endeavours or reasonable endeavours clauses used in contracts?

Endeavours clauses are often used where one party is required to pursue an outcome but cannot guarantee it. For example, a party may be able to influence a third party’s decision without having complete control over it. An endeavours clause can provide a compromise by requiring the party to take specified steps or make appropriate efforts to achieve the desired outcome.

These clauses may also be introduced as a compromise during negotiations where the parties cannot agree on an absolute obligation. However, unless the obligation is clearly defined, disagreement may arise over what steps were required and whether sufficient efforts were made. In some cases, a court may ultimately need to determine the meaning and effect of the clause.

Legal definition/interpretation of the terms

There is no single statutory definition of best endeavours or reasonable endeavours. Their meaning has developed through case law, and the court will interpret the wording in the context of the contract as a whole.

Neither expression ordinarily guarantees that the desired outcome will be achieved. Instead, each generally requires a party to take certain steps or make particular efforts to achieve it. If the intention is to guarantee an outcome or require a specific result, the contract should state this clearly, subject to any relevant qualifications.

Differences between Best Endeavours and Reasonable Endeavours

The distinction between best endeavours and reasonable endeavours depends on the wording and circumstances of the contract. Broadly, best endeavours generally imposes a more demanding obligation, while reasonable endeavours may allow greater scope to choose between available courses of action.

The distinction is not an inflexible rule that one term always requires every possible course of action to be pursued while the other requires only one. The court will consider the particular obligation, the available steps and the commercial context when deciding whether the required standard has been met.

Reasonable endeavours

A reasonable endeavours obligation generally requires a party to take reasonable steps to achieve the specified objective. What is reasonable depends on the circumstances, including the nature of the obligation, the available options and the terms of the contract.

Commercial considerations may be relevant when assessing what steps are reasonable, but a party cannot automatically refuse to act simply because compliance would be inconvenient or costly. The contract may also identify particular steps that must be taken, in which case those express requirements are important when assessing compliance.

Best Endeavours

A best endeavours obligation generally imposes a higher standard than a reasonable endeavours obligation. It may require a party to take all reasonable courses of action available to achieve the objective, depending on the circumstances and contractual wording.

However, it does not necessarily require a party to take every conceivable step regardless of the consequences. The court will consider what the obligation requires in context, including the nature of the transaction and the steps reasonably available to the party. A party accepting a best endeavours obligation should therefore understand the potentially significant practical and financial commitments it may involve.

Commercial Interests

Commercial interests may be relevant when determining whether a party has complied with an endeavours obligation. The extent to which a party may take its own financial position into account will depend on the wording and context of the contract, as well as the applicable legal principles.

A party should not assume that protecting its own commercial interests will excuse a failure to take the required steps. Equally, a best endeavours obligation does not automatically require action that would be commercially ruinous. The contract should address any important limitations or competing priorities expressly where possible.

Where a contract specifies particular steps that must be taken, those requirements should be followed unless the contract provides otherwise.

Drafting Considerations

Choosing the appropriate standard of obligation is both a legal and commercial decision. A party accepting a best endeavours obligation may face a more demanding commitment than one accepting a reasonable endeavours obligation. The appropriate wording will depend on the objective, the degree of control the party has and the commercial risks involved.

To reduce uncertainty, consider specifying the steps that must be taken, any relevant deadlines, the extent of the obligation and any limits on the actions required. Clear drafting can help the parties understand their responsibilities and reduce the scope for disagreement.

How we can help

The practical effect of endeavours clauses can be difficult to assess without considering the contract as a whole. Gannons can help you review and negotiate these provisions, clarify the obligations being imposed and ensure the wording reflects your commercial objectives. Our aim is to reduce uncertainty, manage contractual risk and minimise the potential for disputes and litigation.