Recent revelations of Al Fayed manoeuvres over Fulham FC’s Craven Cottage home highlighted agreements to use “reasonable endeavours” to find a new home for the “Whites”.
Topic: Contract
Who: Mohamed Al Fayed, Fulham Stadium Limited and Fulham River Projects Limited
When: January 2003
Where: Craven Cottage
What happened:
Amidst the recent furore as to whether Fulham Football Club’s owner Mohammed Al Fayed will return the club to Craven Cottage or sell it off for real estate development, a phrase familiar to all those involved in negotiating marketing contracts (and indeed most other types of contract), was mentioned in despatches. The phrase featured in the contract between Fulham Stadium Limited (the current owner of Fulham Football Ground and Craven Cottage) and Fulham River Projects Limited, the entity which appears to be earmarked to a develop the site for residential use should all other plans go awry. In the contract it is stated that Fulham Stadium Limited “shall use reasonable endeavours to acquire an alternative site for use by Fulham Football Club as a football stadium”. But if I undertake by contract to “use reasonable endeavours” to do something, exactly what level of obligation do I have?
The easy answer is that “reasonable endeavours” is less burdensome than “best endeavours”, but “best endeavours” is hardly super-onerous. Using “best endeavours” is accepted as doing what can reasonably be done in the circumstances. In the case of a company, it has been held that the relevant standard is that of a “reasonable and prudent board of directors, acting properly in the interests of their company”. To be more specific, to fulfil a duty to use “best endeavours,” a company would not be required to take action that could lead to its financial ruin or that would undermine its commercial standing or goodwill. On the contrary, the action should be “commercially practical” having regard to the costs involved and the degree of difficulty.
So if that is “best endeavours”, what about the “reasonable” variety? In one case it was held that a party obliged to use “reasonable endeavours” was entitled to consider the likelihood of success if the relevant thing were done as of “prime importance”. This appears to mean that unless taking a particular step is virtually guaranteed to be of clear benefit and advantage to a company, then it should not be embarked on. To put it another way, if there is any reasonable likelihood of taking a particular step resulting in financial or other commercial disadvantage, then it would not be a breach of an obligation to use reasonable endeavours for a company to decline to go down that path.
Of course, if Fulham River Projects Limited had insisted on Fulham Stadium Limited having to use “all reasonable endeavours”, then this might have been marginally more onerous. It is generally felt that “all reasonable endeavours” is somewhere between “best” and “reasonable” endeavours. As it is, the use of these words sounds another discouraging note for those Fulham fans campaigning for a return to Craven Cottage.
Why this matters:
If those drafting contracts are seeking certainty and clarity, then any form of “endeavour” to perform a certain act is obviously not ideal. As for “best endeavours”, older case law suggested that this was an extremely onerous obligation. Indeed one authority suggested that it meant an obligation to “leave no stone unturned” in the performance of the defined task. Under more recent case law however, the position is quite different and if having to use “best endeavours” is not particularly onerous, then an obligation to use “reasonable endeavours” appears to be almost so weak as to be not worth having at all.
