Contract update
01/09/2008
By James Herbert, Partner and Head of Corporate & Commercial.
Two recent cases have helped to interpret the familiar contract expressions, "all reasonable" and "best" endeavours. These terms are used in contracts to dilute obligations which would otherwise be absolute.
Over time, lawyers and judges have attempted to give certainty to contracts which use these expressions, leading to significant debate. Together, the cases give this guidance on these common terms:
- reasonable endeavours is the least onerous obligation as the person with this obligation would not have to take any disadvantageous step, such as expending a significant amount of money,
- best endeavours no longer appears to mean that the person with this obligation must do everything possible to satisfy the obligation, regardless of cost or consequence. This obligation is to do all that can be done reasonably, if commercially practicable,
- all reasonable endeavours was thought to be a compromise between ‘reasonable' and ‘best'. The cases suggest that there is little difference between an obligation to use “all reasonable” and “best” endeavours.
As always, the interpretation of these terms will depend on the underlying circumstances of the case and lawyers will be wary of relying on the terms to give contractual certainty. If it is possible to spell out the actual obligations that must be met, this is always preferable to relying on these expressions, despite the recent clarification. Cases referred to: Rhodia International Holdings Limited v Huntsman International LLC (2007) and Hiscox Syndicates Limited v The Pinnacle Limited (2008).