Meaning of ‘all reasonable but commercially prudent’ endeavours
CPC v QATARI REAL ESTATE [2010]
The meaning of an ‘endeavours’ obligation in this case was examined as it involved a very untypical phrase obliging a party to use “all reasonable but commercially prudent” endeavours. It provided the Court with an opportunity to review and summarise the conclusions from other recent cases on this topic.
facts:
The parties had entered into a joint venture relating to the redevelopment of the former Chelsea barracks site in London. Q was, amongst other things, obliged to endeavour to secure planning permission. Subsequently, it withdrew the application for planning consent in the light of substantial, high profile (even royal!) objections.
decision:
- ‘Endeavours’ obligations are used to weaken contractual commitments by requiring the obligated party to use only a certain amount of effort, as opposed to having an absolute responsibility, to fulfil its obligations. Here, the Court found that Q had not breached its endeavours obligation.
- The judge noted that an obligation to use ‘all reasonable endeavours’ does not always require the obligor to ‘sacrifice his own commercial interests’. He did not feel that an ‘all reasonable endeavours’ obligation equated to a ‘best endeavours’ obligation, as had been suggested in earlier cases.
- This situation was even clearer because of the use of the words "but commercially prudent". Q was only expected to take all reasonable steps to procure planning permission insofar as those steps were commercially prudent. The judge accepted that Q was entitled to consider its own commercial interests in deciding how to proceed.
points to note:
- In many ways this decision is one which is peculiar to its particular drafting but it does demonstrate a degree of welcome common sense in that it appears to suggest that the language should be given its ordinary meaning ie ‘all reasonable endeavours’ equates to ‘all reasonable steps’.
- However, the Court did not take the opportunity to shed any great light on what ‘sacrificing commercial interests’ might mean and how far they have to be sacrificed to comply with an endeavours obligation. The implication certainly seemed to be from the judgment that a ‘best endeavours’ commitment might involve a party having to sacrifice its commercial interests. It appears we will have to wait for another day to find out if that is indeed the case and what exactly that means.
- In the meantime, our firm recommendation is that any endeavours obligation should be the subject of an agreed contractual definition which accords more closely with what the contracting parties are reasonably entitled to expect and with the ordinary meaning of the language used.