If you have ever entered into a commercial contract, you may be familiar with seeing the words best, reasonable, and all reasonable endeavours. After seeing these phrases, you may have wondered what these phrases mean and why your business needs to be aware of them.

What is the purpose of an endeavours clause?

An endeavours clause within a commercial contract is a provision which provides that a party must use a certain level of effort to attempt to achieve a specified result or outcome. As listed above, there are varying levels of endeavours clauses, each individually requiring an amount of effort to achieve the outcome.

Why are they important?

If the party which agreed to deploy a certain level of endeavours to achieve a specified result fail to fulfil such an endeavour, then this may constitute a breach of contract. A breach of contract can have various consequences, such as immediate termination of the agreement without notice by the counterparty or even being liable to pay damages. Therefore, ensuring that you understand the extent of the endeavours clause and what is required in order to fulfil the same is vital to prevent any unwanted repercussions.

Where are they commonly used?

As discussed, you are likely to encounter endeavours clauses in all types of commercial contracts from supply agreements to development contracts. Endeavours clauses are commonly found where a party has agreed to attempt to fulfil an obligation without committing to do so absolutely. Moreover, they are also used particularly where one party is reliant on a third party and do not wish to be caught out by an onerous obligation to fulfil a requirement.

For example, in a Supply Agreement, an endeavours clause can be included to use best or reasonable endeavours to have products arriving at the delivery destination within a specified timeframe. An absolute obligation may not be appropriate where the supplier is reliant on third parties to deliver the items, particularly where customs may be involved.

Endeavours clauses explained.

The common endeavours clauses you may encounter include best, reasonable, and all reasonable endeavours. The meaning of which have been broken down:

• Best endeavours: this wording imposes the most onerous requirements of the three. Although it is not considered an absolute obligation, a best endeavours clause means that “what the words say; they do not mean second-best endeavours” (Sheffield District Railway Co v Great Central Railway Co). Essentially, by agreeing to best endeavours, the obligor commits to doing all possible to achieve the outcome.

• Reasonable endeavours: this wording imposes the least onerous obligation of the three. Reasonable endeavours has come to mean “what would a reasonable and prudent person acting properly in their own commercial interest… have done to try” to achieve the objective (Minerva (Wandsworth) Ltd v Greenland Ram (London) Ltd) as developed through case law. Although less onerous than the other three, the obligor still has an enforceable commitment.

• All reasonable endeavours: this wording is considered to be the middle-ground between best and reasonable endeavours in terms of its obligations however that has not always been the case. The current stance is that a court will interpret it based on the context of the contract and the parties involved. This obviously results in uncertainty as to what an obligor will actually be required to do in practice to comply with such a clause. As such, parties should be cautious when agreeing to this clause.

Berry Smith Commentary

If you encounter an endeavours clause within a commercial contract, then it is important to carefully consider your obligations and the extent to which you will be required to meet the same. It is crucial that you are certain of your obligations under the contract, ensuring that an endeavours clause clearly sets out the steps a party must take to fulfil its requirements as it is useful to prevent uncertainty. Otherwise, failing to meet an endeavours clause could result in a breach of contract.

If you have any queries or need any assistance relating to your commercial contracts, please do not hesitate to contact us at commercial@berrysmith.com or on 029 2034 5511.