By Lisa Rix - April 2017
Often in contracts or settlement agreements, instead of providing that a party must achieve a particular outcome, we allow that party to simply try to achieve the outcome. However, this has given rise to the difficulty in establishing how hard the obligor should be trying. A sliding scale of “endeavours” clauses has developed as a result:
Absolute obligation to achieve an outcome
All Reasonable Endeavours:
“Commercially reasonable endeavours” and “reasonable commercial endeavours” – these are often used to try and soften a reasonable endeavours obligation. However, there is little precedent to support this interpretation, and it can be argued that a reasonable endeavours obligation already involves considering all relevant commercial factors.
You may be thinking that these are all pretty vague, with significant overlap between each of the terms. What’s more, the guidelines on these “endeavours” standards is made even less helpful as the true meaning is always fact and context specific.
In order to avoid the uncertainty that comes with using these “endeavours” terms, here is some practical advice:
When drafting contracts, rather than using an endeavours clause, set out the specific steps an obligor should take to try and achieve the outcome, considering:
As an obligor, record evidence of the steps you have taken in order to try and achieve outcomes under any “endeavours” obligations, and keep the other party informed of any difficulties which arise.
As an obligor, ensure that you have made some effort to achieve the outcome. In the majority of cases, the argument between the parties is mostly to do with whether the obligor has taken any meaningful steps to achieve the outcome at all, rather than the nuances in the differing level of obligations.