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Case report: 'best' and 'all reasonable' endeavours obligations

06/09/2011

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United Kingdom

The UK High Court has again considered the meaning of the phrases “best endeavours” and “all reasonable endeavours”. Read more >

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The UK High Court has again considered the meaning of the phrases “best endeavours” and “all reasonable endeavours” (Jet2.com v Blackpool Airport Limited [2011] EWHC 1529 (Comm)).

Low cost airline operator, Jet2.com and Blackpool Airport Limited (BAL) entered into a 15 year agreement allowing Jet2 to operate scheduled flights from Blackpool airport.  Five years into the contract, in an effort to stem mounting operating losses, BAL decided that it would no longer accommodate arrivals and departures outside its published operating hours of 6am to 8pm.

Jet2 claimed breach of contract and asked the court to issue a declaration of the actual hours during which BAL was required to make the airport available to Jet2’s flights for the remainder of the contract term.

The court first had to decide whether the contract required BAL to operate outside of its normal operating hours at all.  The judge noted that:

  • The contract emphasised that Jet2’s services were “low cost”.
  • Early morning departures and late night departures are essential features of most business models for low cost airlines, as the airline will be seeking to maximise the number of flights and aircraft usage.
  • The contract did not mention any restriction on the airport’s operating hours.

Against this background, the judge concluded that a reasonable person would have understood that the contract required BAL to accommodate Jet2’s flights outside of BAL’s published hours.  However, this obligation was qualified by the use of the expressions “best” and “all reasonable” endeavours.  The contract used both expressions and the parties agreed that there was no difference in meaning between the two.

BAL referred to existing case law and argued that even if it was under an obligation to use “best” or “all reasonable endeavours” to accommodate early morning and late night flights, this did not mean that it had to do anything contrary to its legitimate commercial interests.

Jet2.com argued that the case law on which BAL relied was based on very different circumstances to the situation between BAL and Jet2.  It was not open to BAL to reduce its service level commitment under the contract simply because it was no longer in BAL’s commercial interests to maintain those levels of service.

The judge agreed with Jet2 and said that the meaning of a “best” or “all reasonable” endeavours obligation had to be construed on a case by case basis and could not be extrapolated from other cases. He went on to say:

“It cannot have been intended that BAL should be able to pick and choose what to do in the light of what suits it …financially. It has been losing money since the start and its profitability will have been affected by all sorts of considerations such as its overall efficiency…the decisions it has taken about other airlines at Blackpool and its general competence. These are all risks which one would assume BAL alone to bear in a commercial contract.  It is improbable that the parties would have used an expression in the Agreement to mean that one of them could limit or abandon performance once it became commercially undesirable or unprofitable, just the sort of risks that the parties expect to undertake when they contract. Any such unusual provision would have to be explicit before being accepted as part of what had been agreed.”

Comment and practice tips

This case shows that the expressions “best endeavours” and “all reasonable endeavours” may have different meanings depending on the particular facts or circumstances.  This is particularly so when it comes to determining whether the performing party must sacrifice its legitimate commercial interests.  An interesting aspect of this particular case is the court’s refusal to interpret these expressions so as to allow BAL to escape performance on the grounds that normal contractual risks had materialised.

If a performing party wants its own commercial interests to be balanced against the obligation to perform, then the safest course is for the contract to say so.  For example, the High Court recently construed an obligation to use “all reasonable but commercially prudent endeavours” to mean that the performing party was not required to sacrifice its legitimate commercial interests (See CPC Group Limited v Qatari Diar Real Estate Investment Company [2010] EWHC 1535 (Ch).  The parties could also consider setting out in the contract a non-exhaustive list of the steps that the performing party must take in order to be deemed to have satisfied the required level of endeavour.

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