Best behaviour

Contract 2 iStock 000003466551XSmall 146x219The Court of Appeal has considered the extent of an obligation to use "best endeavours". Gwendoline Davies explains why parties need to ensure they understand what they are agreeing to.

It is not unusual for a contract to require the use of "best endeavours" or "all reasonable endeavours", but following the recent decision in Jet2.com Ltd v Blackpool Airport Ltd [2012] EWCA Civ 417, parties should be sure that they fully understand the extent of the obligations they are taking on before agreeing to such a clause. If not, they risk finding themselves obliged to act contrary to their own commercial interests in order to avoid being in breach of contract.

The Court of Appeal has confirmed that "whether, and to what extent, a person who has undertaken to use his best endeavours can have regard to his own financial interests will depend very much on the nature and terms of the contract in question".

It is therefore very important when negotiating an obligation to use "best" or some other level of endeavours that the parties consider exactly what they may be required to do in order to fulfil that obligation and whether they may in fact be required to act against their own interests.

As we discussed in our review of the first instance decision in this case, contracts frequently use endeavours clauses to impose qualified obligations without the need to set out at length what a party needs to do to comply. The endeavours clause is intended to express the extent of effort or 'endeavours' the performing party needs to use.

Whilst this has its advantages, using an endeavours clause rather than listing the steps to be taken can cause problems if the parties later disagree over the meaning of the clause and how far a party has to go to comply with its obligation. The interpretation of the clause can then become central in a dispute between the parties, and have significant financial and practical consequences.

And, as Blackpool Airport Ltd (BAL) has discovered, an obligation to use "best endeavours" may require you to do more than you had expected.

Jet2.com Ltd (Jet2), the low cost airline, entered into a 15-year contract with BAL which set out the terms on which Jet2 would operate from the airport at Blackpool. The contract provided that "Jet2.com and BAL will co-operate together and use their best endeavours to promote Jet2.com’s low cost services from [Blackpool Airport] and BAL will use all reasonable endeavours to provide a cost base that will facilitate Jet2.com’s low cost pricing."

For over four years Jet2 operated flights out of Blackpool airport in accordance with flight schedules submitted to and accepted by BAL under which there were regular arrivals and departures outside of BAL's normal opening hours. BAL had never made a profit and in 2010 it became increasingly concerned at the costs that it was incurring as a result of flights arriving and departing outside of BAL's normal opening hours.

Eventually BAL gave Jet2 seven days' notice that it would no longer accept departures and arrivals scheduled outside normal opening hours. As a result, two of Jet2's flights had to be diverted to Manchester at short notice which inconvenienced Jet2's passengers at Jet2's expense. Jet2 responded by bringing proceedings against BAL seeking damages for breach of contract and a declaration that under the contract the parties had entered into, BAL was obliged to accept aircraft movements outside normal hours.

The High Court found that BAL was in breach of contract and could not justify its decision by the need to protect its own commercial interests. However, Jet2 did not get the declaration it sought, as the judge would not predict what steps BAL would be required to take over the next 10 years to satisfy the obligation to schedule "wide and flexible hours".

The decision was appealed by BAL but upheld by a majority of the Court of Appeal.

The Court of Appeal decision confirms that what actions a party is actually required to take in order to comply with an endeavours clause will depend on the drafting of the particular agreement and the commercial context of the case.

After some detailed consideration, the Court also noted that there was a difference between a clause whose content was too uncertain to give rise to a binding obligation and a clause which gave rise to a binding obligation, but the precise limits of which were difficult to define in advance.

The points which we highlighted in our previous briefing continue to be of key importance, and parties should always remember that:

  • in order to be enforceable, an obligation must be carefully drafted to ensure that it is sufficiently certain;
  • when using an endeavours clause, they are taking a risk that there will be a disagreement later on as to what the clause actually means;
  • in certain circumstances, it may be better to specify certain steps that the performing party must take as a minimum whilst making it clear that these do not otherwise limit the general obligation, and wherever possible recognising any anticipated expenditure involved;
  • it may be good practice to specify certain steps that the performing party will not be required to take;
  • sometimes a contract would benefit from an express agreement on a particular point rather than using an endeavours clause;
  • previous cases on the meaning of expressions such as "best endeavours" are only a guide and the court will look at the drafting of the agreement in question and the commercial context as a whole;
  • "all reasonable endeavours" is a particularly uncertain concept and should be used with care. Consider whether the phrase "all reasonable but commercially prudent endeavours" would provide you with more certainty.

It is unlikely that we have seen the last of "best endeavours" or "all reasonable endeavours" before the courts so these types of clauses should only be used after careful consideration of the implications.

Gwendoline Davies is a partner in the Commercial Dispute Resolution department at This email address is being protected from spambots. You need JavaScript enabled to view it.. She can be contacted on 0113 283 2500 or by This email address is being protected from spambots. You need JavaScript enabled to view it..