A Spectrum of Endeavours

The recent case of CPC Group Ltd v Qatari Diar Real Estate Ltd [2010] EWHC 1535 (Ch) is of interest to the question of where, on the spectrum of endeavours, the obligation to use "all reasonable endeavours" sits.

The courts made it clear that there is a spectrum of endeavours clauses and that the obligation to use "best endeavours" places a stricter, more onerous obligation on the party then one to use "reasonable endeavours"[1]. Construction contracts often contain obligations on a contractor to use "reasonable endeavours" or "best endeavours" when carrying out and completing the construction works. This issue has been considered by the courts on a number of occasions.

A "reasonable endeavours" obligation more likely only requires the obligor to take one reasonable step to achieve a particular aim and does not require them to do anything that would involve sacrificing their own commercial interests. In contrast, a "best endeavours" obligation probably requires the obligor to take all reasonable steps available to achieve a particular aim. The courts have previously commented on, that an obligation to "use all reasonable endeavours" would be equivalent to a "best endeavours" obligation. However, the Judge in the case of CPC Group Ltd V Qatari Diar Real Estate Ltd took a slightly different view.

The case concerned a joint venture between CPC Group Ltd (C) and Qatari Diar Real Estate Ltd (QD) to acquire and redevelop the Chelsea Barracks in the City of Westminster. QD owed C various obligations, including one to use "all reasonable but commercially prudent endeavours," and both parties owed each other an express duty to act in utmost good faith. Following strong opposition from the Prince of Wales QD withdrew a planning application for the development. One of the main issues the court was asked to consider was whether this withdrawal amounted to a breach of the endeavours obligation.

The Judge found that although QD had breached several clauses of the contract they had not breached their duty of utmost good faith and they had not breached the "all reasonable endeavours" obligation, the judge took the view that "all reasonable endeavours" was not equivalent to "best endeavours." He stated that an "all reasonable endeavours" obligation would not always require the obligor to sacrifice their own commercial interests. In this case it was even clearer, the clause required QD to take all reasonable steps provided that those steps were commercially prudent, so QD was able to consider their own commercial interests.

Although this case has provided further guidance and helps to clarify the distinctions between the different types of endeavours, the precise meaning of each type of endeavour remains ambiguous. What an endeavours clause actually requires in any given case remains a matter of fact and degree. It will depend on the other provisions of the agreement and the surrounding commercial context.

Parties should carefully consider the extent of the "endeavours" obligations they want to accept.

Such negotiations can be highly risky without legal advice and assistance. Clarke Willmott has an experienced team of construction solicitors should you require advice in connection with any of the issues discussed in this article.

For further information on any of the issues in this article, please contact Coriander Davies or Laura Nichols.

[1] Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292

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