Endeavour and good faith obligations: slotting the pieces together


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These obligations are often used together but what do they entail and what are the traps? An endeavour obligation is an obligation to try and achieve a result; for example to obtain planning permission so a contract becomes unconditional.

Case law indicates a spectrum of obligations and care is needed as their satisfaction is assessed by reference to circumstances at the time of performance which may be more onerous than when the contract was entered into.

The least stringent is 'reasonable endeavours' where there may be several ways of achieving the objective, but only a requirement to take one reasonable course of action rather than exhausting all options. Although it is not toothless and could involve reasonable expenditure, there is no obligation to act against your commercial interests.

The next is 'all reasonable endeavours' which was often considered as sat between 'best' and 'reasonable' endeavours, but recent case law indicates, it may be closer to 'best'. It is likely to require the taking of all reasonable courses of action until no more are available, but there is a margin of discretion as to discharging the obligation acknowledging that some actions may be outside of a party's control. It potentially involves some sacrifice of commercial interest, a higher level of expenditure and is likely to include a duty to report on progress with compliance.

'All reasonable but commercially prudent endeavours' arose in the 2010 CPC Group case where the court held that (in the context of obtaining planning permission) the parties were not expected to act against their respective commercial interests, but rather could follow another course of action if advised it had a greater chance of success.

'Best endeavours' is not an absolute obligation, but is the most onerous with the requirement to take all reasonable courses of action available. Once those options are exhausted, it would be unwise to 'down tools' without reference to all parties. It is likely to involve significant expenditure (but not so that a party incurs financial ruin) and an obligation to litigate or lodge, for example, a planning appeal.

English contract law has no general doctrine of 'good faith', but the courts will uphold express obligations to act in good faith. It is wider than just behaving honestly, with a requirement for fair and honest dealings. This can mean remaining faithful to agreed common objectives and being obliged to act in the 'spirit' of the agreement even if your contractual obligations may have been less constrained. If good faith obligations are used then consider limiting them to a specific purpose (such as obtaining third party consent) rather than agreeing to act in good faith in the performance of all contractual obligations.

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