During our latest webinar, Senior Associate Amy Brown discusses the case of Brooke Homes (Bicester) Ltd v Portfolio Property Partners Ltd & Ors (2021) in which the court considers exactly what constitutes an ‘all reasonable endeavours’ obligation (watch again here). With the losing property development company having to pay damages of £13.4 million for breach of its contractual obligations, it is a useful indicator of the court’s interpretation of how far a party’s obligations extend as Anna Singleton reminds us.
Portfolio Property Partners (PP) planned to develop an ‘eco-town’ outside of Bicester, Oxfordshire. It acquired the land and started the planning permission processes. PP then entered into various agreements with Brooke Homes (Bicester) Limited (BH) in which they agreed that subject to the grant of planning permission and satisfaction of other conditions, the land would be sold to BH. The key phrase in these agreements was that parties would use ‘all reasonable endeavours’ to enter into a conditional sale agreement. Time passed and negotiations between the parties continued but no agreement was entered into. BH eventually issued proceedings against PP for breach of contract.
The court decided that PP had failed to use all reasonable endeavours to negotiate the preliminary agreements into a formal contract for sale. A key factor in the court’s decision was PP’s failure to take positive action. Significantly, it did not produce a plan identifying the land (when it could have reasonably done so). This, with other actions which failed to advance the negotiations, led the court to decide that PP had not used ‘all reasonable endeavours’ in discharging its obligations and had breached its contractual obligations.
‘All reasonable endeavours’
The judge made the following points as to what constitutes all ‘reasonable endeavours’:
- Active endeavours are required by the parties;
- Failing to do something is likely to be a breach;
- All reasonable endeavours could even be construed as a ‘best endeavours’ obligations.
Other ‘endeavours’ obligations
Contrast this with the other endeavours wording:
- ‘reasonable endeavours’ – imposes the lowest obligation and is generally satisfied if one reasonable path is taken.
- ‘all reasonable endeavours’ – all reasonable paths and endeavours to be taken. This falls in between reasonable and best.
- ‘best endeavours’ – the most onerous (short of an absolute obligation) and requires all reasonable actions to be exhausted. This could include acting against a party’s own commercial interest.
These issues crop up time and time again, whether in Heads of Terms negotiations or in contract drafting and care should always be taken when agreeing endeavours clauses. Here are some top tips:
- Be careful – only say what you really mean and remember that one word can change the whole meaning.
- ‘Best endeavours’ is particularly onerous and following this case so is ‘all reasonable endeavours’ so agree it / use it wisely.
- Be specific, set out what is or is not required, for example, timeframes, cost levels, are parties required to litigate, must a party purse an appeal?
- Keep records of actions taken (and actions or non-actions of the other party).
- Finally, remember that the terms are not interchangeable and be aware of the different levels of obligations and effort that each requires.