Contractual terms which require one party to use "reasonable endeavours", "all reasonable endeavours" or (even worse from the obligor's perspective) "best endeavours" in order to bring about certain events have frequently been the source of disputes when the event fails to occur. In such circumstances, questions often arise as to whether the relevant party has done enough to comply with their contractual obligations or whether a breach of contract has in fact occurred.
The High Court has recently been asked to consider such requirements again, on this occasion in the context of a dispute arising out of the sale of an interest in a copper mining project in southern Spain (Astor Management AG v Atalaya Mining plc [2017] EWHC 425 (Comm)). Under the terms of the relevant agreement, a large bulk of the purchase price was deferred and payable upon the purchaser group securing senior loan facilities sufficient to restart the mine. The relevant purchaser undertook to use all reasonable endeavours to obtain the senior debt facility and restart the mine by the end of 2009 (subsequently amended to 31 Dec 2010).
As it turned out, operations did restart at the mine but financed by the injection of equity funds via intra-group loans rather than any external bank debt. The claimants asserted, among other things, that the relevant deferred consideration had still fallen due and also that the purchaser defendants had failed to comply with their obligations to use all reasonable endeavours to obtain the relevant senior debt facility. In their defence, the defendants contended that, among other things, the obligation to use reasonable endeavours to obtain the relevant senior debt was unenforceable because there were no objective criteria available to the court to determine whether reasonable endeavours had in fact been used.
Mr Justice Leggatt in the High Court disagreed with the defendants’ arguments on this latter point, noting that it was the court's responsibility to give effect to what contracting parties have agreed, even where their agreement fails to make that a straightforward task. The court held that the obligation to use reasonable endeavours to obtain the senior debt facility was enforceable, albeit that the defendants had not on the facts of this particular case breached the relevant term.
Commenting on this case, Head of Banking and Finance, Jonathan Porteous, noted that “This case shows that the courts are willing to enforce “endeavours” clauses and have a go at working out what constitutes appropriate endeavours in the circumstances. Their assessment may of course differ materially from that of the parties and so in an ideal world, where parties are not unduly constrained by time and cost, they would spell out the actions needed to be taken to achieve a desired outcome and the consequences of failing to take them”.