Best endeavours, all reasonable endeavours and reasonable endeavours

A ‘best endeavours’ obligation is the most onerous of the three levels of ‘endeavours’ obligations. In the words of one old case: the term ‘best endeavours’ ‘means what the words say; they do not mean second-best endeavours’. A party should take steps that a prudent, determined and reasonable obligee (i.e. the beneficiary of the obligation), acting in its own interests and desiring to achieve that result, would take. A party that has assumed a ‘best endeavours’ obligation — the obligor — must exhaust all of a number of reasonable courses that could be taken in a given situation to achieve a particular aim.

This is not an absolute obligation, nor is it ‘the next best thing to an absolute obligation or a guarantee’. A ‘best endeavours obligation may require the obligor to incur expenditure’. However, depending on the nature and terms of the contract in question, the obligor may have some regard for its own commercial interests. This obligation does not therefore include actions that would lead to its financial ruin, undermine its commercial standing or goodwill or have no likelihood of being successful. For instance, the obligor may be required to take the risk of success or failure in proceeding to litigate, but only where there is a reasonable prospect of commercial success.

The line between a ‘best endeavours’ obligation and an ‘all reasonable endeavours’ obligation can be a blurred one and it is too sweeping a statement to suggest that an ‘all reasonable endeavours’ obligation is a half-way house between ‘best’ and ‘reasonable’ endeavours. While an ‘all reasonable endeavours’ obligation does not necessarily equate to a ‘best endeavours obligation, in the context of the number of courses of action a party must take, there is some alignment between the two phrases. For instance, it appears that an ‘all reasonable endeavours’ clause ‘requires you to go on using endeavours until the point is reached when all reasonable endeavours have been exhausted’ — which looks very much like a ‘best endeavours’ obligation. However, there may be a distinction between the two concepts in terms of the commercial sacrifice an obligor has to bear…

Click on the link below to read the rest of the Walker Morris briefing.