In the real world, individuals and organisations are constrained in all kinds of way, and such constraints may affect their ability to meet their contractual obligations. For instance, a business may wish to complete a project for a client by a particular date, but all kinds of external factors – changes to specification, staff absence or illness, supply failures, and so on – may affect its ability to do so.
That’s where qualified contractual obligations come in.
Consider the differences between contractual obligations on a person to:
- “do X”
- “use best endeavours to do X”
- “use all reasonable endeavours to do X”
- “use reasonable endeavours to do X”?
The first type of obligation is quite different from the other three.
It is an absolute obligation, while the other three are qualified obligations. Where there is an absolute obligation, the person must do X whatever the circumstances; and if the person does not do X, the person will be in breach of contract.
There is a great deal of uncertainty about the meaning of the three forms of qualified obligation listed above. In different court cases, the courts have taken different approaches.
Despite this uncertainty, it is clear that:
- each of the forms of qualified obligation is less demanding than an absolute obligation;
- “reasonable endeavours” is less demanding than “best endeavours”; and
- the exact scope of any form of qualified obligation will depend upon the particulars of the case.
Best endeavours: this suggest a high standard of obligation. You must not merely try, but try to the best of your abilities. In a business context, does this mean you have to bankrupt yourself trying? No, the court cases suggest. But it may mean taking actions that are contrary to your commercial interests.
It is sometimes argued that you should never agree to use your best endeavours. But this argument does not stand up to analysis. An obligation to use best endeavours is, as we have said, less demanding than an absolute obligation; and contracting parties very often agree to absolute obligations. Whether you should agree to a particular obligation to use best endeavours will, of course, depend upon the circumstances.
All reasonable endeavours
Clearly, such an obligation is more demanding than an obligation to use only reasonable endeavours. But how much more demanding?
In one of the modern cases, an obligation to use “all reasonable endeavours” was found to be identical to an obligation to use “best endeavours”. My own view is that they are only identical in particular circumstances: namely, those circumstances where:
- there are a number of different courses of action that a party could take to achieve the desired result, and looked at individually it would be reasonable for that party to take each of those courses of action, and there are no available courses of action going beyond the requirements of reasonableness but within the ambit of a party using its best efforts; or
- there is only one course of action that the party could take to achieve the desired result.
This is, however, only one view.
An obligation to use “reasonable endeavours” is sometimes said to be an obligation to try, but without an implication that the party subject to the obligation must act in a way that is materially detrimental to its own interests. But, think about this: it seems obvious that there may be circumstances where reasonableness requires that a person act in such a way. For instance, if the incurring of a small material detriment saves the other party from a massive and disproportionate loss, would not it be reasonable to incur that detriment?
This brings to the fore the point made above: that the scope of an obligation to use “best endeavours” or (especially) “reasonable endeavours” will depend upon the circumstances of the case.
Defining the scope of a qualified obligation
Notwithstanding the uncertainties, these types of qualified obligation are very useful. Contract drafting would be a good deal harder without them
If you wish to reduce the uncertainties, you can define what these phrases mean in your contracts. Alternatively, and perhaps more straightforwardly, you can list the minimum actions that must be taken by a person in respect of each qualified obligation.