Reasonable endeavours – Is it even a thing?

Yes it is.

A recent UK case has examined the phrase ‘reasonable endeavours’ in relation to contractual obligations. It is common for contracts to require a party to use reasonable endeavours to achieve an outcome. When that desired outcome is achieved there is no issue. However, when the outcome is not achieved parties may allege that the other party has not used reasonable endeavours in that they did not do everything they were supposed to.

In Minerva (Wandsworth) Ltd v Greenland Ram (London) Ltd [2017] EWHC 1457 (Ch) the Court held that the test for reasonable endeavours is:

What would a reasonable and prudent person acting properly in their own commercial interests and applying their minds to their contractual obligation have done

As you can see this is more of an art than a science and it will depend on the facts of the case. In this case the Court held that Minerva had used reasonable endeavours and relevant factors being the time to obtain approval, expert evidence in support of Minerva’s actions, and the fact that there was no evidence that the negotiations with the Council were mishandled.

While this offers some comfort to parties with ‘reasonable endeavours’ clauses in their contract, it also increases the ability for further arguments later on. Other variations of the ‘reasonable endeavours’ requirement include ‘best endeavours’ and ‘all reasonable endeavours’. Each will require a slightly different level of endeavours to be applied, the exact difference being unclear.

Adding a reasonable endeavours requirement is better than not having anything. However, our recommendation is to specify the actual steps required and add in thresholds where possible. The more uncertainty that can be removed at the drafting stage the better.

C

Photo credit: Wise workspaces

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