Author: Gillian Birkby
Parties negotiating contracts can find themselves spending a great deal of time refining their contractual obligations, be they “reasonable endeavours”, “best endeavours”, “all reasonable endeavours” or some other standard. However, as a recent case highlights, the most important way of avoiding unwanted repercussions is certainty in the obligation itself.
The Court of Appeal had to consider a clause requiring the use of “best endeavours” and “all reasonable endeavours” to decide whether Blackpool Airport Limited (BAL) was in breach of contract when it declared that it would no longer accommodate Jet2.com’s wish to operate outside the normal hours of the airport. The contract itself was silent on the operation of flights outside such hours and BAL was incurring a loss accepting those arrivals and departures.
The contract between Jet2 and BAL provided that the parties would co-operate and use their best endeavours to promote Jet2’s low cost services from Blackpool Airport, and that BAL would use all reasonable endeavours to provide a cost base that would facilitate Jet2’s low cost pricing.
Jet2 argued that under the contract BAL was obliged to promote its low cost services and handle its arrivals and departures outside normal hours. The nature of the low cost airline business required the ability to operate aircraft early in the morning and late at night. An inability to operate at such times would undermine the viability of an airline. BAL argued that the obligations were too uncertain to give rise to any obligation in law. The majority of the Court of Appeal agreed with Jet2; the obligation on BAL obliged it to do all that it reasonably could do to enable Jet2’s business to succeed and grow. The promotion of Jet2’s business extended to keeping the airport open to accommodate flights outside normal hours.
Lord Justice Lewison disagreed with the majority view. He considered that the objective of the best endeavours, to promote Jet2’s low cost services, was too vague to be enforceable. As he put it “if BAL had contractually committed itself to keeping the airport open at whatever hours Jet2 required [the contract] would surely have said something about opening hours”… “How is a court to define or recognise the limits of the obligation [to promote Jet2’s low cost services]…would it, for example, require BAL to provide enhanced passenger lounges for Jet2’s departing passengers; or offer them complimentary refreshments while they wait?” However, this was only the minority view.
All the judges agreed that the other disputed obligation, to use all reasonable endeavours to provide a cost base to facilitate Jet2’s low cost pricing, was too uncertain to give it any objective meaning.
The judgment means that Jet2 can continue to operate at Blackpool Airport outside normal hours and BAL will continue to incur losses as a result. Financial cost was not a trump card to allow BAL to avoid what would otherwise be an obligation under the contract.
Best endeavours did not mean second best endeavours. However, the court did accept that if it became clear that Jet2 could not ever expect to operate a low cost service from Blackpool profitably, BAL would not be obliged to incur further losses in seeking to promote a failing business.
The case provides a timely reminder that the courts will, if possible, uphold endeavours clauses. It highlights the fact that a construction contract containing such obligations, which is usually the case in relation to delay to the works, will be given some force. Contractors should be prepared to show what they have done to comply with this obligation.
Gillian Birkby, Head of Construction, Fladgate LLP