It is very common to see obligations in a contract qualified by words like ‘to use reasonable endeavours’ – but how far does this limit an obligation?
Without any qualification, where a contract imposes an obligation on a party to achieve a particular objective, or to procure its achievement, then, if unqualified, the obligation is absolute and failure to comply will, on the face of it, give rise to liability for breach of contract.
The High Court considered in Jet2.com Ltd v Blackpool Airport Ltd [2011] EWHC 1529 whether an ‘all reasonable endeavours’ obligation required a party to act against its commercial interests.
In that case, Blackpool Airport Ltd made a 15 year contract with Jet2.com Ltd. The agreement required the airport to ‘use all reasonable endeavours to provide a low cost base to facilitate Jet2.com’s low-cost pricing’. The agreement said nothing about operating hours.
For the first four years of the contract, the airport ran at a loss, partly because the airport allowed Jet2.com flights to arrive and depart outside the airport’s opening hours. In a later attempt to improve profitability, Blackpool Airport decided to refuse to operate outside its published hours and gave Jet2.com one week to change its schedules.
Jet2.com sued for breach of contract but Blackpool Airport defended its actions on the basis that it did not believe that its duty to use ‘all reasonable endeavours’ required it to act against its own commercial interests.
The High Court held that it was well within the airport’s control to meet the obligation in the contract, distinguishing this case from other ‘all reasonable endeavours’ cases where a party was not required to pay an extortionate price towards achieving a result outside its control, and Jet.com therefore won their case.
What can be learnt from this case?
Firstly, very careful attention must be paid to obligations in a contract and the extent of those obligations. Where possible, a party giving an obligation in a contract should qualify that obligation to the widest extent possible and should not agree to an obligation that it cannot honour.
Secondly, Jet2.com’s victory in this case came at the cost of an interim injunction and an expedited trial involving leading counsel, 19 thick bundles of documents and evidence from ten witnesses. It was revealed during the hearing that the contract was prepared with little legal help. Had the parties instructed specialist commercial contract solicitors to draft the contract in the first place and if the contract expressly stated the hours within which the parties had to operate then a costly dispute (in terms of both expense and relationships) need never have arisen.