In this case, the High Court looked at the legal meaning of the phrase “all reasonable endeavours”, which is commonly found in property contracts.
The defendant group of companies had strategically bought land in Oxfordshire and had applied for planning permission to build an eco-town. They then had entered into various development agreements with the developer claimant. In these contracts, both parties agreed to use all reasonable endeavours and to act in good faith to later sign a conditional sale agreement for the purchase of the land for this residential development.
Three years later, this conditional sale agreement had still not been signed and the parties’ business relationship was deteriorating. The claimant company sued for damages of £500 million claiming breach of, amongst other things, the good faith and all reasonable endeavours clauses.
The Judge identified three types of endeavours clauses: “reasonable endeavours”, “all reasonable endeavours” and “best endeavours”. “Reasonable endeavours” required the least amount of effort and “best endeavours” the most, to the extent that sometimes even a party’s own commercial interests would have to be sacrificed. The Judge found that “all reasonable endeavours” was closer to “best endeavours” than previously thought. Any passivity or inactivity by a party under an obligation to use “all reasonable endeavours” was likely to be a breach of contract.
In this case, because the defendants had not progressed matters sufficiently and had not strived to get the conditional sale agreement signed, the Judge held that they had been in breach of contract. He awarded the claimant £13 million in damages, being the assessed amount of the loss of chance from not being able to complete the conditional sale agreement. However, this was far less than the sum claimed by the claimant.
Accordingly, any contracts requiring a party to use “all reasonable endeavours” should be reassessed in the light of this case as the obligations may now be more onerous than originally thought. Caution should be used when drafting this type of clause.
Ross Paterson, Solicitor, 25th February 2022