In brief – Australian interpretation different to the UK
In the UK, the term "best endeavours" implies a higher standard than the term "reasonable endeavours". However, in Australia the terms appear to have the same practical effect.
English position – "best endeavours" means a higher threshold must be met
In England, it seems that the terms "best" and "reasonable" are given their denotative meaning for the purposes of interpreting the standard associated with the terms "best endeavours" and "reasonable endeavours". The standard required to achieve "reasonable endeavours" is less than the standard required to achieve "best endeavours".
Sheffield District Railway Co v Great Central Railway Co
In Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451, one of the first cases on the meaning of "best endeavours", Lawrence J said:
"best endeavours' means what the words say; they do not mean second best endeavours... the words mean that the Great Central must, broadly speaking, leave no stone unturned to develop traffic on the Sheffield District Line."
IBM United Kingdom Limited v Rockware Glass Limited
In the more recent decision of IBM United Kingdom Limited v Rockware Glass Limited [1980] FSR 335, Buckley LJ expressed that something more than reasonable is required in the fulfilment of a "best endeavours" obligation. LJ Lane said, in respect of the term "best endeavours", that:
"these words oblige the purchaser to take all reasonable steps which a prudent and determined man acting in his own interests and anxious...would have taken." (p.345).
Given this judicial distinction between "best" and "reasonable", a legal practitioner in England would need to be prudent when considering whether to apply a "best endeavours" or "reasonable endeavours" standard in specific circumstances.
Australian position – no practical difference between "best" and "reasonable"
By contrast, in Australia there is no discernible difference in standard between "best endeavours" and "reasonable endeavours". This means that whether you use the term "reasonable endeavours" or "best endeavours", the consequences are identical.
Hospital Products Limited v United States Surgical Corporation
A leading decision on the interpretation of "best endeavours" in Australia is Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 83 where an obligation in a distributorship agreement required the use of "best endeavours" to promote sales. Gibbs CJ considered various cases and concluded that:
"an obligation to use "best endeavours" does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more" (p.429).
From this, it seems that a court will consider reasonableness when interpreting whether a "best endeavours" standard has been achieved.
Graeme Webb Investments Pty Limited v Soerpyk Pty Limited
On the other hand, the term "reasonable endeavours" has not been judicially interpreted. However, it was considered in Graeme Webb Investments Pty Limited v Soerpyk Pty Limited [1993] NSW.
In this case, a vendor and purchaser entered into a contract which stipulated that completion was conditional upon the registration of a plan of subdivision and that the vendor would make all reasonable endeavours to achieve such a registration as soon as possible. The Local Government Act provided that in order to obtain a registration of a plan of subdivision, a section 27 certificate was required under the Water Board Act.
The vendor failed to make the payment required to obtain a section 27 certificate and the condition to register the plan of subdivision was unsatisfied. Justice Hodgson found in favour of the purchaser because:
- It was foreseeable at the time the contract was entered into that payment would be required to obtain a section 27 certificate
- It was standard practice to make a payment to obtain a section 27 certificate
- As a property developer, the vendor should have known that it was necessary to make the payment to obtain a section 27 certificate
Prevailing standard of reasonableness
In Graeme Webb, it was considered "reasonable" in the circumstances for the vendor to make a payment to obtain the section 27 certificate required for the registration of the plan of subdivision to satisfy the condition in the contract.
Hence the benchmark in both Hospital Products, where "best endeavours" is considered and Graeme Webb, where "reasonable endeavours" is considered, is that of reasonableness.
Australian commentators also concur that there is no distinction between the use of "best endeavours" and "reasonable endeavours". (Please see "Further reading" below.)
This means that relative to the UK, less caution is required from an Australian lawyer contemplating whether to use "best endeavours" or "reasonable endeavours" in a contract.
Drafting contracts in Australia
If specific obligations are unknown at the time of drafting a contract, or if the obligation is in the control of one party, the use of the terms "best endeavours" and "reasonable endeavours" is generally the only option.
However, it may be possible to minimise ambiguity by clearly prescribing specific contractual requirements, rather than using the terms "best endeavours" and "reasonable endeavours". This makes it less likely that anyone could misinterpret their obligations.
A way of further reducing risk and uncertainty is to specify the damages which will result from the breach of an obligation in a contract.
Further reading
Dharmananda K, Another Endeavour expedition – discovering the meaning of endeavour clauses, Building and Construction Law, (2001) 17, pp.117-8.
Doyle S & Mulgrew K, What Do "Best Endeavours", "Reasonable Endeavours" and "All Reasonable Endeavours" Mean? The Australian Corporate Lawyer, September 2002, pp.11-13.
Emerson J, Simply the Best? Discovering the real meaning of "best endeavours", Building and Construction Law, (2001) 17(4), pp.223-9.
Featherstone A & Harris G, 'Best' v 'reasonable' endeavours – and fiduciary obligations, Australian Construction Law Bulletin, (2004) 16(6), p.67.
For further information please contact:
Cvetanka Trpeski, Senior Associate
Phone: + 61 2 9233 5544
Email: cst@swaab.com.au
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.