Endeavours clauses – what is the difference?

Introduction

“Reasonable endeavours.”

“All reasonable endeavours.”

“Best endeavours.”

Three phrases that appear in countless commercial contracts. Phrases that many people assume form a simple sliding scale of obligation. The reality under English law is more nuanced.

Although courts recognise a hierarchy, the practical difference between the three standards often depends on the commercial context.

Reasonable endeavours

A reasonable endeavours obligation is generally regarded as the least onerous of the three.

The party whose endeavours we are concerned with is usually required to take a reasonable course of action rather than exhaust every possible option. They can balance its own commercial interests against those of its counterparty and is not normally expected to incur significant cost or sacrifice its own business interests unless the contract indicates otherwise.

In practice, this means a party can often decide that a particular course is not commercially worthwhile and pursue an alternative, or even take no further action if no reasonable option remains.

Takeaway: If you want to preserve commercial flexibility, a reasonable endeavours obligation is often the safest choice.

Best endeavours

Best endeavours has traditionally been regarded as the highest standard recognised by English law.

Here a party must take all steps which a prudent, determined and reasonable person acting in its own interests and desiring to achieve the contractual objective would take. This may require pursuing multiple possible courses of action rather than simply selecting one.

Importantly, however, “best” does not mean “everything imaginable”. The courts do not generally require a party to act irrationally or to destroy its own business. The obligation remains subject to reasonableness.

Whether a party must incur expenditure depends on the contract and the surrounding circumstances. A best endeavours obligation may require significant expenditure if that is objectively reasonable in the context of the bargain, but it will not usually require a party to risk its commercial viability or breach other contractual obligations.

Takeaway: A best endeavours obligation may require substantial effort, persistence and expenditure. If there are limits on what the parties intend, those limits should be stated expressly.

All reasonable endeavours

For many years, lawyers debated whether all reasonable endeavours sat closer to reasonable endeavours or to best endeavours.

Modern authority generally places it somewhere between the two, although in practice it may produce an outcome very similar to best endeavours.

Unlike a simple reasonable endeavours obligation, all reasonable endeavours may require a party to pursue multiple reasonable courses of action where appropriate. However, unlike best endeavours, the courts may be more willing to recognise that a party can have regard to its own commercial interests.

The exact position remains highly fact-sensitive. The courts have repeatedly emphasised that these expressions are not terms of art with fixed definitions and must be interpreted in the context of the particular agreement.

Takeaway: If you choose “all reasonable endeavours”, do not assume everyone shares the same understanding of what it requires. Consider spelling out specific actions that must (or need not) be taken. Rather than debating which phrase is “better”, ask what behaviour you actually want. If particular steps must be taken, say so, and the more important the obligation, the less sensible it is to rely solely on one of the standard endeavours formulations.

Finally, it’s worth considering how the UK position compare with US law.

The position in the US is less uniform. Unlike England and Wales, there is no single common law approach. The meaning of “best efforts”, “reasonable efforts” and “commercially reasonable efforts” varies between states.

Delaware law has become particularly influential in commercial contracts. Delaware courts have increasingly treated “best efforts”, “reasonable best efforts” and “commercially reasonable efforts” as requiring broadly similar conduct: namely, reasonable diligence directed towards achieving the contractual objective. The analysis focuses heavily on the contract as a whole and the parties’ objective expectations rather than on any fixed hierarchy of terminology.

For transactions governed by US law, parties therefore often reduce uncertainty by defining the required standard expressly or by specifying concrete actions that must be taken. That is increasingly regarded as best practice on both sides of the Atlantic.

If you’d like some advice on this topic, please feel free to get in touch.