Let’s endeavour to explain “endeavours”15 Nov 2016
Endeavours clauses, that is, phrases where you promise to use “best endeavours” or “reasonable endeavours” to achieve a particular objective have become commonplace in commercial agreements. But do we really know what these clauses mean, and what obligations they place on us?
As a general rule, and rather unhelpfully, the meaning of an “endeavours” clause can only truly be assessed in the context of each particular agreement, at the time that agreement was entered into. Not very helpful!
However, in the past, the courts have provided the following guidance to assist us in navigating this minefield:
1. Best Endeavours:
- this is usually the most onerous version used;
- importantly, it does not require you to do everything to achieve the desired result – perhaps just those steps that a prudent, determined and reasonable person wishing to achieve the same result would take (which is still a fairly onerous standard);
- does require expenditure to achieve the obligation, but not to the extent that insolvency becomes an inevitable result; and
- can be overridden by your other duties, for example, a director’s duty to act in the best interests of a company’s members as a whole.
2. Reasonable Endeavours:
- a more limited obligation;
- allows you to take your own commercial considerations into account;
- requires some expenditure, but does not require you to sacrifice your own commercial interests; and
- once you have carried out reasonable steps to achieve the objective (which is determined by taking into account the chance of achieving the objective) then you do not have to carryout any further steps.
3. All Reasonable Endeavours:
- sits somewhere between best endeavours and reasonable endeavours, although in some cases, has been interpreted by the courts to be almost as onerous an obligation as best endeavours; and
- may require you to take all reasonable courses of action, rather than just some of the reasonable courses (as for reasonable endeavours) and therefore may require some commercial sacrifice.
It is clear from the above, that there is still considerable uncertainty regarding the effect of endeavours clauses and the obligations they place on the party subject to them.
We would therefore recommend careful consideration of what each obligation requires in its context. This includes considering the chance of achieving the desired result, the steps that could be taken to achieve the result, the potential impact taking these steps may have on you or your business and the importance of the obligation to the contract as a whole.