It is quite common to see the use of phrases such as “best endeavours” or “reasonable endeavours” incorporated in one or more charter party clauses. These phrases are used in clauses relating to e.g. stevedore damage, in oil major approvals clauses and other types of clauses.
It is therefore useful to have an idea about what best or reasonable endeavours mean: it is certainly not unusual to come across the view that reasonable endeavours means that (just) reasonable action etc. should be taken whereas best endeavours is quite commonly argued to be that virtually everything (perhaps even to the extent of being financially crippling) should be done with little restriction on the efforts to be made.
It is not straightforward to give exact guidance on what is required by either reasonable or best endeavours clauses. Much will probably depend on the type of duty which is subject to this kind of “endeavours clause” and on the factual circumstances.
In 2010, the English High Court made a judgment concerning a contract where one party was to use “all reasonable but commercially prudent endeavours to enable the achievement of the various threshold events.” Even though this case concerned a property redevelopment, the judgment is nevertheless a renewed reminder of what reasonable or best endeavours will require.
If a charter party includes a requirement that “best endeavours” should be exercised, then it is important to recognise that this does, in fact, not mean that virtually everything (including a disregard of costs etc.) should be done: there are, after all, limits to even what “best endeavours” will require.
This particular phrase has been dealt with by the English courts over a significant number of years. These cases are primarily not shipping cases but the principles expressed in case law will nevertheless be relevant for charter party disputes over what best endeavours will require a party to do. The words “best endeavours” have been said to require a party “to leave no stone unturned” but on the other hand and at the same time it will not require action which would be detrimental to the commercial interests of that party.
Over the years, the best endeavours and their limitations have been expressed as:
1911:
Best endeavours... do not mean second best endeavours... the words mean that the [obligor] must, broadly speaking, leave no stone unturned...” but at the same time this duty does not mean “... that the limits of reason must be overstepped...”
1951:
In the context of exercising best endeavours to secure delivery, i.e. with respect to a delivery time, the court held that a reasonable time in this context “means a time reasonable in all the circumstances.”
1952:
A duty to do what a party “could reasonably do in the circumstances. The standard of reasonableness is that of a reasonable and prudent [party] acting properly in the interest of [the] company...”
1980:
In the context of using best endeavours to make an application for an official permit, the initial application was refused but was not pursued by appeal etc. By not appealing the party had not used its best endeavours to obtain the permission given that the court considered that there was a “reasonable chance” of success.
1980:
“Best endeavours are something less than efforts which go beyond the bounds of reason but are considerably more than casual and intermittent activity. There must at least be the doing of all that reasonable persons reasonably could do in the circumstances “.
It will be seen that there is, after all, a test of reasonableness involved even for the term best endeavours and expressed in varying ways the actions or efforts which are to be made are not to go “beyond the bounds of reason” and “the limits of reason must not be overstepped”.
If a particular action is required in the contract i.e. that one or more particular steps are being expressly mentioned as a step which must be taken, then this should in any event be complied with by the party who is so bound.
The use of the words “reasonable endeavours” means something less burdensome than best endeavours.
It seems that a party who has to use “only” reasonable endeavours rather than best endeavours is entitled to take into account, to a greater extent, anything such as commercial considerations, costs and any other commercial disadvantage in order to balance what he should reasonably do under this type of requirement.
In 2007, the London Commercial Court said that an “obligation to use reasonable endeavours was less stringent than to use best endeavours. Using reasonable endeavours did not require the sacrifice on the party’s own commercial interests” – unless the contract specified that certain steps should be taken. A party being required to use reasonable endeavours was required to go on using endeavours until the point was reached when all reasonable endeavours had been exhausted.
In a the most recent case where the term “reasonable endeavours” has been dealt with in 2010, reasonable endeavours were expressed to be a duty to take a reasonable course of action but not necessarily all reasonable courses available to them and not always sacrifice a party’s own commercial interest.
Many times, each and every charter party will have facts that are peculiar to it and regardless of the phrase or words employed in the charter, the specific facts will be important when it has to be established whether sufficient endeavours have been made.
At the very least, it should be borne in mind that even “best endeavours” will not require an abandonment of reasonableness or a sacrifice of commercial interests.
/ CPC Group Ltd. v Qatari Diar Real Estate [2010] EWHC 1535 (CH)
/ Rhodia International Holdings v Huntsman International [2007] 2 Lloyds Rep 325
/ Sheffield District Railway Co. v Great Central Railway Co. [1911] 27 TLR 451
/ Markland v Jack Barkley [1951] 1 All ER 714
/ Terrell v Mable Todd & Co. [1952] 2 TLR 574
/ IMB United Kingdom Limited v Rockware Glass Limited [1980] FSR 335
/ Pips Leisure Productions Limited v Walton [1980] 43 P & CR 415