Have your efforts really been good enough? A reflection on the latest case addressing what is meant by “all reasonable endeavours”

How many hours are spent, when drafting an agreement, addressing whether a party is required to use “reasonable” or “best” endeavours? If the agreement then becomes the subject of a dispute, at least a similar number of hours are then spent considering what that meant and whether the endeavours of the party in question were actually enough.

The recent case of Brooke Homes (Bicester) Limited v Portfolio Property Partners Limited and Others [2021] EWCH 3015 (Ch) provides a salient reminder of the case law on this and at what steps the High Court considers necessary to satisfy an “all reasonable endeavours” clause.

In this case the defendant was a developer which entered into Heads of Agreement with the claimant. Under the Heads of Agreement the defendant would acquire land from the claimant to build an eco-town, subject to conditions. As part of the Heads of Agreement there was a clause on page five which concluded “Agreement: The parties shall use all reasonable endeavours to enter into a final binding agreement…”

Although the claimant made pre-payments and there was interest funding, the defendant began discussions with another potential purchaser. To that extent, by the time three years had passed no conditional sale agreement had been entered into and the claimant issued proceedings.

Among the questions the court needed to consider was, what effort is required from the parties in an “all reasonable endeavours” clause.

At paragraphs 97 onwards the judge, Mr Hugh Sims QC, gave consideration to the question of what amounts to “all reasonable endeavours”. In particular, he considered that there are three types of “endeavour” clauses:

1. reasonable endeavours;
2. all reasonable endeavours; and
3. best endeavours.

His reflections suggested that “reasonable endeavours” required nothing more than pursuing one reasonable option to satisfy the requirement, whereas a clause for “all reasonable endeavours” would require all reasonable options to be exhausted. It could, therefore, be argued to be almost the same level of effort and exhaustion of options as a “best endeavours” clause. 

The court’s continued analysis in judgment reflects on the fact that some “best endeavours” clauses require a “sacrifice of commercial interests” which was less likely with an “all reasonable endeavours” clause. 

However, the judge then went on to comment that the “precise wording and context” will be influential as to the actual requirements which are necessary and that in relation to an “all endeavours” clause this may actually stretch to commercial sacrifice in a similar way to a “best endeavours” clause.

The summary made it clear that where there is an “all reasonable endeavours” clause it requires action on the part of the party faced with the obligation and a failure to undertake an action is likely to be construed as a potential breach. 

Further, the court highlighted that, if a claiming party identifies a reasonable course of action which the defendant has not pursued, the defendant is going to have provide a reason (and expectedly a substantial and meritorious reason) as to why that course of action was not pursued. Any court looking at suggestions as to courses of action which were not pursued will, inevitably, have to consider whether the pursuance of such action could have resulted in the outcome required.

So, whilst it is already accepted that the efforts required to satisfy an “all reasonable endeavours” clause rest somewhere between reasonable endeavours and best endeavours, this case highlights that an “all reasonable endeavours” clause can start to look far more like a “best endeavours” clause with regards to the level of effort required. Further, that inaction can be a significant downfall for a party which faces the burden.

If you wish to discuss any of the issues outlined in this article, then please contact Maria Peyman or another member of the Litigation and Dispute Resolution Team.