We have spent many hours negotiating with suppliers the terms ‘Reasonable Endeavours’ and ‘Best Endeavours’. The general positioning of most suppliers is that they have a ‘policy’ that prevents them from accepting ‘Best Endeavours’. Our readers will, we believe, welcome some guidance in this specialised area of contract law. In the case of EDI Central Limited vs. Scottish Car Parks Limited, Scottish Court of Sessions [2010] CSOH_141, there is a host of information on the subject.
Two clauses (6 and 13) were at the heart of the dispute. Clause 6 included “The Developer shall procure that the CT project is pursued with all reasonable endeavours and as would be expected of a normal prudent commercial developer experienced in developments of that nature…” Clause 13 included “The Developer and NCP shall use all reasonable endeavours to achieve the main objectives and shall act in good faith in respect of the same and in accordance with this Agreement.” The acute reader will notice the word ‘all’ before ‘reasonable endeavours’ in both of these clauses.
The EDI case involved the EDI Group, established in the late 1980’s by the then Edinburgh District Council. National Car Parks is a company traditionally associated with the running of car parks. The essence of the dispute was a proposed development, the Castle Terrace Car Park.
In the decision it states that an obligation to use ‘all reasonable endeavours’ was a more stringent obligation, or imported a higher test, than an obligation simply to use ‘reasonable endeavours’. Broadly speaking, the obligation meant that the person on whom the obligation was placed must ‘leave no stone unturned’. There was the view that under such a provision the person was not required to act beyond his own commercial interests. Importantly, it was also stated that the contract may specify steps which have to be taken regardless of the commercial interest of the party required to take them.
‘Best endeavours’ gave an obligation to take the steps ‘which a prudent, determined, and reasonable owner, acting in his own interests and designed to achieve that result would take’.
The EDI case reinforces the Brian Farringotn Ltd. Opinion that ‘reasonable endeavours’ is the weakest obligation to place on a supplier. ‘All reasonable endeavours’ is more stringent but, ultimately, ‘best endeavours’ is the strongest obligation. This logic must be related to ‘material breach’ and ‘termination rights’.
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The above discussion is based on the following decision by the Scottish Court: http://goo.gl/r3uqpG
