'Best' v 'Reasonable' Endeavours

Have you ever seen a contract or agreement including terms such as “best endeavours”, “reasonable endeavours”, or “all reasonable endeavours”? 

As a general rule, these terms are used to compel a person to take action to fulfill an obligation or condition that might be beyond that person’s immediate control.

Despite being common terms in many contracts, the precise meaning of each of these variations is actually quite uncertain.  When these terms have been brought before the Courts, judges have reached differing conclusions as to what they mean in practice depending on the facts of each case.

Best Endeavours

A best endeavours obligation is generally considered to be more onerous than an obligation of “reasonable endeavours”. It obliges a party to take all available courses of action to fulfill the obligation that a prudent, determined and reasonable person might have taken.

The steps that may be taken can include spending money to fulfill the obligation, as long as this does not involve spending more than a reasonable amount of money or result in financial jeopardy.

Reasonable Endeavours

An obligation to use "reasonable endeavours" is less onerous for a party than a “best endeavours “obligation. The "reasonable endeavours" obligation is typically defined by reference to an objective standard of what an ordinary competent and reasonable person might do in the same circumstances. Under an obligation of “reasonable endeavours” a person is able to balance their contractual obligations against their commercial operations, in deciding which course of action to pursue.

However, if the clause that requires reasonable endeavours sets out specific steps, then the person having that obligation must take those steps regardless of costs.

All Reasonable Endeavours

The courts have grappled with the interpretation of an obligation of “all reasonable endeavours”, and considered whether it is a middle ground between “reasonable endeavours” and “best endeavours”, or as recent Court interpretation suggests, whether there is no real difference between “all reasonable endeavours” and “best endeavours”.

With that in mind, if a party is under an “all reasonable endeavours” obligation it is expected that the party will not be obliged to take a course of action in order to fulfill that condition, where fulfilling that condition is beyond that party’s control, and where that action may result in the sacrifice of its own financial interests.

However, if a party is under an “all reasonable endeavours” obligation to do something that is within its control, then that party is obliged to fulfil that condition and cannot choose what to do in light of its commercial interests. In the event that the term is extended to read “all reasonable but commercially prudent endeavours”, then the party concerned may consider its commercial interests in deciding how to fulfill the condition.

Clearing up confusion

To ensure that the interpretation of your contract does not end up in Court, it is advisable to stipulate specific steps a party must take in order to fulfill a condition. This can be bolstered by setting a timeframe in which the condition should be satisfied or endured. Outlining possible penalties, remedies or responses if the condition is not fulfilled could add some clarity around what is expected by each party.