Monday, 20 March 2017

What is the Law in Your Life?

It is common to find a reference to one party to a contract being obliged to use her/his reasonable endeavours to do something. What does that phrase mean and what are the alternatives?

1.  The commercial context of an endeavours obligation will always dictate what such a provision actually requires of the party who agrees to it. Such issues are commonly discussed in the Courts.

2.  The most onerous obligation is a “best endeavours” obligation. This has been held to mean that the party concerned must do everything possible (and legal) to fulfil the obligation. For that reason, it is best avoided when acting for the party who is being asked to agree to such an obligation.

3. The least onerous obligation is to use “reasonable endeavours”. This means that the party must take reasonable steps to fulfil her/his obligation. Sitting back and doing nothing is not enough. Each case will be assessed on its own facts and circumstances. It is an underlying principle of the Scots common law that parties to a contract are deemed to be obliged to act in such a manner as furthers the objectives of the contractual relationship between them – and certainly not act contrary to these terms.

4.  A common compromise is to seek an “all reasonable” or “all reasonable commercial” endeavours obligation. These are variants on a theme which, by necessity, fall between the two extremes.

5.  The message must be to think carefully about all such obligations which are asked of you before agreeing to grant same.