16 August 2012
Endeavouring to explain endeavours
The obligation on a contractor to use “best endeavours” to achieve some stated outcome is a not uncommon one. It appears now in the main 2011 JCT contracts in the context of an obligation placed on a contractor to use “best endeavours” to prevent delays, however they are caused; and to prevent completion being delayed or further delayed beyond the relevant completion date.
It is generally accepted that, in the hierarchy of “endeavours” clauses, the obligation to use “best endeavours” places a more onerous obligation on a party than does a clause requiring “all reasonable endeavours” or “reasonable endeavours” to be undertaken. Just how onerous the requirement to use “best endeavours” can be was highlighted recently in the Court of Appeal case of Jet2.com Ltd v Blackpool Airport Ltd.
Blackpool Airport entered into a 15 year agreement with Jet2.com to allow Jet2’s planes to use the airport. Included within the signed contract was an obligation on both parties to “cooperate together and use their best endeavours to promote Jet2.com’s low cost services from Blackpool Airport”. At the time of signing the contract it seemed to be commonly understood by the parties that this clause required the airport to keep its facilities open for Jet2’s use outside of its normal opening hours of 6am to 8pm; and for 4 years this is what happened.
The problem for the airport was that the cost of keeping its facilities open for Jet2’s use outside of its normal opening hours cost it far more than it made in fees from Jet2. So, after 4 years and in an attempt to improve profitability, the airport gave Jet2 one weeks notice of its intention to refuse to accept arrivals or departures outside of the published opening hours.
Unsurprisingly, Jet2 did not take kindly to this substantial change of position by the airport, and brought a claim for breach of contract. In the Court of Appeal, the three judges considered the wording of the “best endeavours” clause in the context of the facts of the case and concluded that Jet2 had a good claim for breach of contract.
Of more importance to building contractors was the comments of the judges that “the fact that a party has agreed to use his best endeavours pre-supposes that he may well be put to some financial cost, so financial cost cannot be a trump card to enable him to extricate himself from what would otherwise be his obligation”. In other words, “best endeavours” can seriously damage your bank balance.
However, in what perhaps can be taken as a crumb of comfort, the Court of Appeal also left open the door for a “best endeavours” clause to be declared void if, on the facts of a particular case, the financial cost of complying with it is too great. On the facts of the Jet2.com case, the most the Court was prepared to accept was that Blackpool Airport would probably be relieved of its obligations under the contract if it became clear that Jet2 would never operate profitably from Blackpool Airport, since the obligation did not extend to promoting a failing business.
The message must be that “best endeavours” clauses remain potentially very onerous and are to be avoided if possible. A more satisfactory approach is to expressly state what steps a party may have to take if circumstances demand it.