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September 1st, 2012
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‘Best endeavours’ clauses in contracts

Jet2.com Limited v Blackpool Airport Limited [2012] EWCA Civ 417

By Dairmuid Short and Adine Abro

Blame it on human nature, a fear of being deceived or an attempt at ‘crafty’ drafting by an attorney, but we cannot seem to get away from including the notorious ‘best endeavours’ or ‘reasonable endeavours’ expressions in our contracts.

The interpretation of endeavours clauses has resulted in many a convoluted judgment; the interpretation always seeming, to some extent, to benefit one party over another.

Case law has held that ‘best endeavours’ and ‘reasonable endeavours’ clauses are not to be equated with each other and that a less stringent obligation is linked to a ‘reasonable endeavours’ expression (see CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010] EWCH 1535 (Ch)).

However, the English judgment in Jet2.com Limited v Blackpool Airport Limited [2011] EWHC 1529 (Comm), which was recently upheld by the Court of Appeal (civil division) in April 2012, accepted the parties’ agreement that the two clauses amount to the same thing. In this matter the courts rather revisited the following questions:

  • Does a best endeavours clause create a legal obligation at all?
  • If so, what is the ambit of such a clause?

Background

In September 2005 low-cost airline Jet2.com entered into a 15-year agreement, described as a ‘Letter of Agreement’, with Blackpool Airport (BAL). Clause 1 of the agreement provided: ‘Jet2.com and BAL will cooperate 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’ (our emphasis).

BAL initially allowed Jet2.com to operate outside the airport’s normal opening hours of 7 am to 9 pm. However, after four years, BAL decided that it could no longer accommodate this arrangement due to the airport’s substantial operating losses and attempted to force Jet2.com to operate in its normal operating hours.

The dispute that ensued was whether or not the expressions ‘best endeavours’ and ‘all reasonable endeavours’ obliged BAL to continue to allow Jet2.com to operate flights outside of its normal operating hours, despite the alleged negative impact on BAL’s commercial interests.

Jet2.com argued that the obligation imposed to use best endeavours to promote Jet2.com’s low-cost services obliged BAL to handle its arrivals and departures between 6 am and 12 am and to do its best to accommodate occasional movement outside those hours.

In reply, BAL argued that –

  • its obligations were limited to promoting Jet2.com’s services in the sense of advertising and marketing;
  • the Letter of Agreement was silent about the hours during which it would accept aircraft movements;
  • it was under no obligation to accept movements outside its normal hours; and
  • it was entitled to take into account its commercial interests when deciding what steps to take in the performance of its best endeavours to promote Jet2.com’s services.

BAL’s representative argued that clause 1 of the agreement was not intended to create legally enforceable obligations of any kind. He likened it to a preamble in which the parties described in general terms the intent and purpose of their agreement.

The decision

The judge held that clause 1 was couched in language of a kind that was indicative of an intention to create binding obligations. An important distinction was drawn between a clause with content that is so uncertain that it is incapable of creating a binding obligation and a clause that gives rise to a binding obligation, the precise limits of which are difficult to define in advance, but which, nonetheless, must be given practical content.

The more difficult question concerned the nature and content of the obligations that were created.

In general terms, an obligation to use best endeavours or reasonable endeavours is not in itself regarded as too uncertain to be unenforceable. The measure is rather whether the objective of the endeavours can be ascertained with sufficient certainty.

The content of an obligation to use reasonable endeavours depends on the context in which the expression is used and the most important part of the context is the objective towards which the endeavours are to be directed. If the endeavours are directed towards a result that can be identified with certainty, then it can also be decided whether the endeavours made satisfy the obligation.

In applying this, the judge held that the flexible working hours could be determined with sufficient certainty to enable a determination of what reasonable endeavours might be in relation to these. The court took into account that BAL allowed other airlines to operate outside normal operating hours. Evidence also showed that for a low-cost airline to be successful it needed to operate outside normal operating hours.

On the question of commercial interest, it was held that BAL did not have complete freedom to have regard to its commercial interests. A party cannot abandon its obligations under an endeavours clause simply because the obligations are no longer in the commercial interests of that party. Confirming the finding of the court a quo, the appeal court held that the obligation on BAL to provide a low-cost base was not absolute and that the exercise of best endeavours had to be judged in the light of the parties’ specific circumstances.

Conclusion

The Jet2.com Limited case gives guidance on how best to interpret an endeavours clause.

Interpretation will depend on the object of the endeavours, having regard to the specific circumstances relating to the agreement. Importantly, in relation to both expressions, commercial interest may play a subordinate role to the obligation to use best or reasonable endeavours.

This English case is likely to have persuasive authority in South African courts, although there is no hard-and-fast rule in this regard in South Africa. The interpretation of these expressions will depend on a wider context.

Parties to agreements may want to consider a more proactive approach in the use of these expressions. They might consider specifying precisely what actions are required to satisfy a best or reasonable endeavours obligation. This could include a time limit on the obligation, for example.

If the parties wish to reduce the uncertainty, then the endeavours can be limited to reasonable commercial endeavours.

Dairmuid Short BIur (NMMU) and Adine Abro LLB (UJ) are attorneys at Webber Wentzel in Johannesburg. They were assisted by candidate attorney Leona Maharaj BA LLB (UKZN).

This article was first published in De Rebus in 2012 (Sept) DR 47.