CONTRACTUAL obligations are usually absolute.
That is to say if a party does not conform exactly to what the wording of the contract states then there is a breach. This can cause difficulty when performance of a contractual obligation requires an unrelated third party carrying out a task – for example a local authority granting planning permission or a contractor carrying out building works.
In these instances, a party will often try and move away from an absolute obligation to carry out the task and qualify his position by saying that he will “try” and perform the obligation in question. These qualified obligations are known as “endeavours” clauses. There are three common levels.
The highest level is that a party will use his “best endeavours” to achieve the objective. Whilst a “best endeavours” obligation is not an absolute obligation, it is not toothless. Here, the contracting party may have to take steps “which a prudent, determined and reasonable obligee (ie a person who has the benefit of the clause) acting in his own interests and desiring to achieve the end result would take”. This may involve the obligor (ie the person who is under the duty) spending significant amounts of money but not to the extent that such expenditure would be ruinous.
The next step down is for the obligor to use “reasonable endeavours” to achieve the end result. This level of endeavour involves balancing the obligation against all the relevant commercial considerations under the contract. Whilst this obligation may require the obligor to spend money the obligor is not required to sacrifice his own commercial interests in attempting to fulfil the task.
Sitting in-between “best endeavours” and “reasonable endeavours” is an obligation upon the obligor to use “all reasonable endeavours”. This obligation exhibits characteristics of the best endeavours and reasonable endeavours clauses and depending on the circumstances the obligation may or may not require the obligor to spend money or sacrifice his own commercial interests.
The above are general propositions laid down by the courts stating how an endeavours clause may be interpreted. However, the courts have stated that interpretation is fact (or contract) specific and the duties implied under an endeavours clause in one contract may not be the same under a different contract. Much depends on the underlying commercial deal that the parties have agreed.
Contracting parties should not enter into obligations lightly. Qualified obligations, on the whole, are better than absolute obligations for the majority under a duty to do something. However, qualified obligations introduce an element of uncertainty into a contract. It is often difficult to say before hand exactly what is requested when it is requested to use reasonable endeavours to do something. Legal advice should be sought to ensure that the appropriate level of “endeavour” is requested. Both parties will need to understand what this means to avoid disputes at a later stage.
