Contracts impose obligations on parties which a failure to satisfy will result in the breaching party being liable for breach of contract. Most of the obligations on a party will be clear and concise. However, usually in leases, obligations on a party can require a party to endeavour to achieve something. This endeavour can create an uncertainty as to what extent of action is required to satisfy the obligation imposed on that party.
There are three main levels of the spectrum of standards of endeavours. It is important to specify which level is required for the obligation.
- Best Endeavours – This requires a party to take all steps within its power to achieve the result. This could force a party to act outside of their commercial interests and as a result incur significant expense. This could also extend to require a party to take court action to achieve the desired result. This is seen as the next best thing to an absolute obligation or a guarantee and therefore a party may wish to avoid this standard of endeavour being imposed on them.
- Reasonable endeavours – This standard requires the party to take a reasonable course of action to achieve the result. It allows the party to balance the weight of their contractual obligations with their commercial considerations. While some expenditure may be required, the obligator should not have to suffer in terms of their commercial interests. Although this standard is lower than best endeavours, paired with a clear objective it is capable of enforcing an obligation that may not always be easy for a party to satisfy.
- All reasonable endeavours – This standard is thought to be a compromise between best endeavours and reasonable endeavours. This standard may require expenditure by the obligator; however the extent of the sacrifice of commercial interests should be far less.
Other variations of endeavours include; commercially reasonable endeavours and reasonable commercial endeavours. These are often inserted in an attempt to soften the reasonable endeavours obligation. Also the standard utmost endeavours can be used which advances to the best endeavours requirements, this is extremely onerous.
When selecting a standard of endeavours for a particular obligation, it is essential to take into account various considerations such as who bares the costs, for what period the obligator should pursue that objective, whether legal action should be taken if required, whether progress updates are required and if unsuccessful in achieving the desired result, who should take the next steps. What is imperative is that, whether you are a Landlord or a Tenant, you seek legal advice before entering into a Lease. Our Legal-500 recognised Commercial Property Team are here to help you.
For further information or advice on commercial leases, please contact a member of our Commercial Property Team.