Reasonable and Best Endeavours

01.01.07

Reasonable and Best Endeavours

A court has confirmed that there is a distinction between an obligation to use reasonable endeavours and an obligation to use best endeavours. The case concerned a business transfer agreement. The purchaser (H) was obliged under the agreement to use reasonable endeavours to procure the novation of a particular contract with (C). The agreement required H to provide financial information to C and, if C reasonably required, for H or a member of its group to give a direct covenant to C to perform and observe the contract. C was not satisfied about H's financial condition and was requesting some form of guarantee. The matter was not resolved and, after 6 years, novation had not occurred.

The judge said that there was a distinction between best and reasonable endeavours "as a matter of language and business common sense." He said, "...There may be a number of reasonable courses which could be taken in a given situation to achieve a particular aim. An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all the reasonable courses he can. In that context, it may well be that an obligation to use all reasonable endeavours equates with using best endeavours."

He concluded that an obligation to use reasonable endeavours is less stringent than one to use best endeavours. The judge went on to say that an obligation to use reasonable endeavours did not require the party to sacrifice its own commercial interests.

This was subject to one caveat: where the contract actually specified certain steps have to be taken as part of the exercise of reasonable endeavours (as here, the provision of a direct covenant if so required), those steps will have to be taken even if that could involve the sacrificing of a party's commercial interests.

Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292 (Comm)