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Best Endeavours and Reasonable Endeavours – The Lessons of Jet2.Com

It is almost impossible to believe that after more than a hundred years of debate the best that can be said by the leading authority on contractual interpretation is that:

“It is probable that an obligation to use best endeavours is more onerous than an obligation to use reasonable endeavours.”

Lord Justice Lewison – The Interpretation of Contracts (Fifth ed. 2011) §16.07. 

The Case

Faced with a clause requiring both best endeavours and all reasonable endeavours, the focus was slightly different in Jet2.Com Ltd v Blackpool Airport Limited [2012] EWCA 417. The Court had to consider the extent of the obligations on Blackpool Airport Limited (BAL) arising from the following clause:

1. and BAL will co-operate together and use their best endeavours to promote’s low cost services from BA and BAL will use all reasonable endeavours to provide a cost base that will facilitate’s low cost pricing.

There was ample background evidence about the agreement and the economics of operating a low-cost airline. The issue that had given rise to the dispute was simple enough, Jet2 argued that the obligation imposed on both parties by clause 1 to use their best endeavours to promote Jet2’s low-cost services obliged BAL to handle its arrivals and departures between 6.00 a.m. and midnight and to do its best to accommodate occasional movements outside those hours. BAL argued that its obligation was limited to promoting Jet2’s services in the sense of advertising and marketing them, that the agreement was silent about the hours during which it would accept aircraft movements and that it was under no obligation to accept movements outside normal opening hours. It also argued that it was entitled to take into account its own commercial interests when deciding what steps to take in the exercise of its best endeavours to promote Jet2’s services. It was not obliged to handle aircraft movements outside normal opening hours if the additional revenue it obtained did not cover the cost of doing so. In addition, the argument was raised that clause 1 was in the nature of a preamble and not intended to give rise to legally obligations and, more significantly, that clause 1 was simply too vague to give rise to a legally enforceable agreement.

The majority of the Court of Appeal found in favour of Jet2.Com with the result that BAL  was obliged to sacrifice its commercial interests  in favour of  those of the airline. The clause was not too vague to be enforceable [31] per Moore-Bick LJ:

“In my view the obligation to use best endeavours to promote Jet2’s business obliged BAL to do all that it reasonably could to enable that business to succeed and grow and I do not think the object of the best endeavours is too uncertain to be capable of giving rise to a legally binding obligation. In my view the promotion of Jet2’s business did extend to keeping the airport open to accommodate flights outside normal hours, subject to any right it might have to protect its own financial interests. Accordingly, I think the judge’s decision on that aspect of the matter was correct. On the other hand, an obligation to use all reasonable endeavours to provide a cost base that will facilitate some essential element of another person’s business seems to me to pose greater problems, because it is much more difficult to identify its content. The words are said to import an obligation to use all reasonable endeavours to enable Jet2 to keep its unit costs (and therefore ticket prices) down by enabling it to use its aircraft in the most efficient manner, but I find them too opaque to enable me to give them that meaning with any confidence. However, it is unnecessary to reach any final decision on that question in the present case.” 

Lewison LJ, in a cogent dissenting judgment, emphatically disagreed:

57. So the question is always: what do the words mean? As the judge pointed out ” The Agreement says nothing about operations outside Blackpool’s normal opening hours.”

58. If a contract says nothing about a particular topic, then even if that topic is demonstrated by the admissible background to be an important one, the default position must surely be that the topic in question is simply not covered by the contract.

59. I recognise, of course, how reluctant a court is to reach a conclusion that an apparent obligation intended to have legal content in fact has no enforceable content at all. But if the concept embodied in the clause in question is too vague, and there are no objective criteria that the court can apply in deciding whether or not the clause has been honoured, then there may be no alternative conclusion. In some cases a clause that appears to be too uncertain to enforce can be saved by a provision referring disputes to an expert or arbitrator. But that is not the case here. There is a way in which the clause can be given some content, albeit not as a free-standing and independent obligation. That is by treating clause 1 as setting out the general principle which is then implemented by the more detailed provisions of clause 2.

It is hard to disagree with Lewison LJ’s concluding comment:

“In my judgment the judge’s conclusion was not “construction of the contract” in the sense of “interpreting the contract”. It was “construction of the contract” in the sense of “making the contract” which the parties had not themselves made.”

The Lessons

1. Too often “best endeavours” and “reasonable endeavours” clauses are used to bridge a gap between the parties or to paper over cracks in an optimistic endeavour to reach an agreement without the consequences being fully worked out.  That is the route to disagreement and costly litigation.  It is hardly an answer to suggest, as Longmore LJ did here [72], that “Once performance had begun, the party who proposed to change the status quo should have to justify that change of stance. The “out of normal hours” use of the airport caused no problems for four years….”

2. If such a clause is to be used every effort should be made to specify precisely what obligations are  to be the object of the clause. A little time and trouble in the drafting may save a lot of pain later.
Related link:  Profile of Richard Perkoff
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