Facts
Appeal
Decision
Comment


Facts

In Jet2.com Ltd v Blackpool Airport Ltd(1) Blackpool Airport Ltd entered into a letter agreement with Jet2.com Ltd, a low-cost airline, setting out the terms on which Jet2 would operate from Blackpool for the following 15 years. Clause 1 of the agreement stated:

"[Jet2 and Blackpool Airport Ltd will] co-operate together and use their best endeavours to promote Jet2.com's low cost services from [Blackpool Airport] and [Blackpool Airport Ltd] will use all reasonable endeavours to provide a cost base that will facilitate Jet2.com's low cost pricing."

Clause 2 set out a variety of operational matters, such as the terms on which Blackpool Airport Ltd would provide ground services and marketing support for Jet2's business. Blackpool Airport Ltd's normal opening hours were 6:00 am to 8:00 pm in summer and 7:00 am to 9:00 pm in winter, although it operated outside those hours by agreement with various airline operators. However, the letter agreement was silent as to the operating hours for Jet2's flights.

For over four years from March 2006, Jet2 operated flights out of Blackpool with regular arrivals and departures outside normal opening hours. Blackpool Airport Ltd incurred additional costs in providing support services outside those hours, and ran at a loss. In 2010 Blackpool Airport Ltd decided that it would no longer accept aircraft movements outside normal hours and gave Jet2 one week's notice of the change. As a result, two of Jet2's flights were diverted from Blackpool to Manchester at short notice, causing considerable inconvenience to passengers and expense to Jet2.

Jet2 brought proceedings against Blackpool Airport Ltd, claiming damages for breach of contract and seeking a declaration that under the letter agreement, Blackpool Airport Ltd was obliged to accept aircraft movements outside normal opening hours.

At first instance Blackpool Airport Ltd was found to be in breach of contract in suddenly refusing to handle flights outside normal operating hours. The judge held that the word "promote" in Clause 1 had been used to mean 'advance' in a general sense, and that the provision of "a cost base that [would] facilitate Jet2's low cost pricing" meant providing facilities and services that would enable such pricing. This would include accepting aircraft movement outside the airport's normal operating hours. The absence of an express provision about operating hours in the letter agreement was not fatal to Jet2's case. Blackpool Airport Ltd appealed.

Appeal

Blackpool Airport Ltd argued that the first paragraph of Clause 1 was too uncertain to give rise to an enforceable obligation. In general, an obligation to use best endeavours or all reasonable endeavours is not regarded as too uncertain to be enforceable, provided that the object of the endeavours can be ascertained with sufficient certainty. The absence of a reference to operating hours strongly indicated that it was not a matter within the scope of the agreement. Blackpool Airport Ltd also argued that it was entitled to take into account its own commercial interests when deciding on the steps to take in the exercise of its best endeavours to promote Jet2's services; it maintained that it was not obliged to handle aircraft movements outside normal hours if the additional revenue that it obtained did not cover the cost.

Jet2 relied on the nature of the low-cost airline business in support of its argument that the parties had taken for granted that Jet2 would need to schedule aircraft movements outside normal operating hours. There was considerable evidence before the judge to support his finding that low-cost airlines depend on being able to make maximum use of their aircraft, and that this means operating aircraft early in the morning and late at night. In 2005 other low-cost airlines, including Ryanair and Monarch, were operating out of Blackpool, commonly outside normal hours.

Decision

The Court of Appeal upheld the decision at first instance with a two-to-one majority. All three judges focused on the importance of the object of the endeavours clause (ie, the obligation to which the endeavours were directed). It was accepted that if the object or obligation were too vague or uncertain, the endeavours clause would be unenforceable. It was therefore necessary to decide whether "the promotion of Jet2's low cost services" and "the provision of a cost base that would facilitate Jet2's low cost pricing" constituted a sufficiently certain object to make the endeavours obligations enforceable.

Lord Justice Moore-Bick
Lord Justice Moore-Bick (with Lord Justice Longmore) considered that the object was sufficiently certain to make the endeavours obligations enforceable. He saw an important difference between a clause whose content is so uncertain that it is incapable of creating a binding obligation and a clause which gives rise to a binding obligation whose precise limits are difficult to define in advance, but which can nonetheless be given practical content. In this case, he agreed with the first instance finding that the word "promote" bore the wider meaning of 'to advance', rather than the narrower meaning argued by Blackpool Airport Ltd, which was 'to market'. In his view, the obligation to use best endeavours to promote Jet2's business obliged Blackpool Airport Ltd to do all that it reasonably could to enable that business to succeed and grow, which extended to keeping the airport open to accommodate flights outside normal hours. The ability to schedule flights outside normal hours was essential to Jet2's business and fundamental to the letter agreement. In the circumstances, Blackpool Airport Ltd could not restrict Jet2's aircraft movements to normal hours, even though it made a loss every time that it was required to accept an aircraft movement outside those hours. However, the judge considered that if it became clear that Jet2 could never expect to operate low-cost services from Blackpool profitably, Blackpool Airport Ltd would not be obliged to incur further losses in seeking to promote a failing business.

The judge considered that the words "the provision of a cost base that would facilitate Jet2's low cost pricing" were too opaque to enable him to give them any meaning, but given that he had found the words "the promotion of Jet2's low cost services" to be sufficiently certain, it was unnecessary for him to reach a final decision.

Lord Justice Longmore
Lord Justice Longmore considered that it will always be essential to consider the status quo. To that end, Blackpool Airport Ltd should have to justify a change to the aircraft schedule. He recognised that there might be circumstances in which Blackpool Airport Ltd, after proper notice, might be entitled to refuse to continue handling aircraft movements outside normal hours.

Lord Justice Lewison
Lord Justice Lewison dissented. He thought that the object of the endeavours and the range of possible endeavours should be considered together in order to decide whether there was a justiciable obligation. He considered it wrong in principle to focus on the particular factual situation which had given rise to the dispute without taking account of other factual situations to which the clause might extend if one side or the other were correct, and considered it impossible for the court to define the limits of the obligation in this case. It was argued that the obligation required Blackpool Airport Ltd to accept a flight schedule outside normal operating hours; however, a difficulty arose in determining where such an obligation ended. The judge wondered whether, for example, the obligation to promote Jet2's business would mean that the airline would have first choice of take-off or landing slots in preference to other carriers.

The judge also thought it relevant that the letter agreement was silent on operations outside normal opening hours. If a contract says nothing about a particular topic, the default position must be that the topic in question is simply not covered by the contract, even if the issue is demonstrated to be important. Although he was reluctant to reach a conclusion that an apparent obligation, intended to have legal content, had no such enforceable content, he considered the concept embodied in Clause 1 to be too vague. He noted that the trial judge's conclusion was 'construction of the contract' not in the sense of 'interpreting the contract', but rather in the sense of 'making a contract' that the parties themselves had not made.

Comment

This case highlights the importance of the obligation itself, rather than the endeavours language surrounding it. Parties to a contract should explicitly set out what they are trying to achieve, although the court has confirmed that where the parties intend to create an enforceable obligation, it will seek to uphold it where it can. In this case, the obligation was sufficiently certain for it to be enforceable, although it is easy to see how this could have been interpreted otherwise.

The decision also highlights the issue of how far a party is expected to act against its financial interests in complying with a 'best endeavours' clause. Although this was not an excuse for Blackpool Airport Ltd to refuse to accept flights outside normal operating hours, it is ultimately a question of fact and will differ in each case.

For further information on this topic please contact Rebecca Birkby at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (rebecca.birkby@rpc.co.uk).

Endnotes

(1) [2012] EWCA Civ 417.