The court was called upon to decide whether the defendant property developer had used ‘reasonable endeavours’ to achieve ‘as soon as reasonably practicable’ the satisfaction of contractual conditions, upon the non-fulfilment of which the developer became obliged to make a payment of £1.4 million.
The term ‘reasonable endeavours’ may require a party to take only one of a number of reasonable courses, not all of them.
An obligation to use ‘best endeavours’ probably requires a party to take all reasonable courses it can.
If the contract requires ‘all reasonable endeavours’ this may equate to best endeavours.
Therefore, reasonable endeavours creates an obligation to take reasonable steps which are feasible and which balance the risk of adverse consequences against the obligation to perform the promise. The party cannot, by their own actions, make the fulfilment of the promise more difficult.
The requirement to do so ‘as soon as reasonably practicable’ is not an obligation to do it ‘when convenient’ or ‘at the time best suited’ to the party obliged to act.
In this matter the developer controlled the speed of the negotiation process in order to accommodate its funding needs without primary regard to the need to take steps as soon as reasonably practicable. They approached matters on the footing of how late they could safely leave the negotiations in order to get their funding in place.
What lay behind their approach was not a desire to take steps as soon as reasonably practicable but a desire to leave things as late as possible to ensure that a related agreement remained conditional until funds were released.
If matters had been driven by a desire to do things as soon as reasonably practicable it is highly probable that the obligation would have been fulfilled by the cut-off date. The plaintiff was therefore entitled to £1.4 million because of the failure to use reasonable endeavours.
[The case is Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd]
