Best endeavours v reasonable endeavours – what’s the difference?
Endeavours clauses
It is unreasonable for a licensee to have to commit to an absolute obligation to develop and commercialise since there may be any number of reasons why to do so may make no commercial sense. Consequently the parties to licences frequently qualify such obligations by the use of "endeavours" obligations; the most common of these being "reasonable endeavours" or "best endeavours", with the latter being the more stringent. Although frequently employed, the effect of using such diligence wording is not widely understood.
As a general rule of construction the meaning of such wording must be assessed at the date the agreement was entered into by reference to its terms and the other terms of the agreement, although whether the obligation has been satisfied is assessed by reference to the facts at the time of performance of the obligation.
Case law does provide some assistance in the interpretation of such clauses and this can be summarised as follows.
Best endeavours
The courts have historically 
recognised this formulation as being an onerous obligation requiring a party to take "all those steps in their power which are capable of producing the desired results" although it is by no means an absolute obligation and the concept of reasonableness still applies. One expression of this is that "best endeavours" requires "all that reasonable persons reasonably could do in the circumstances".
A recent Court of Appeal case examined whether a commitment to use "best endeavours" could require a party to act against its commercial interests in order to fulfil its contractual obligations. It concluded that in the particular circumstances of the case, it was necessary for the party to do so, but the extent to which a party would be required to do so will be a question of fact in each case.
Reasonable endeavours (or commercially reasonable endeavours)
It is fair to say that "reasonable endeavours" is even less clear-cut. The case law makes reference to a number of subjective considerations, in particular balancing the contractual obligation against "all relevant commercial considerations". This would include the cost of a particular course of action. The obligation would depend upon the circumstances of the party subject to it and they would not be required to sacrifice their own commercial interests. Judicial comment also suggests that reasonable endeavours only require a party to take one reasonable course of action, rather than many.
Thus, although reasonable endeavours are not as stringent an obligation as best endeavours, it is not without teeth and 
could certainly constitute an enforceable obligation that may not be easy to satisfy.
By prefacing this formulation by the word "commercially" it may be thought that this in some way softens the diligence obligation, but in fact there is no real support for the suggestion that the courts would distinguish between the two terms.
Conclusions
General conclusions which can be drawn are that:
- the courts will look to uphold endeavours clauses, particularly where the contract is already being performed; and
- parties need to be as clear as possible about what it is they are trying to achieve in order to avoid an endeavours clause failing for uncertainty.
For this reason, wherever express steps are required and can be identified at the time of execution of the contract, then they should be set out explicitly.
If you have any questions on this article or would like to propose a subject to be addressed by Synapse please contact us.
"A recent Court of Appeal case examined whether a commitment to use “best endeavours” could require a party to act against its commercial interests in order to fulfil its contractual obligations."