The Court of Appeal of England and Wales in Jet2.com Limited v Blackpool Airport Limited [2011] EWHC 1529 (Comm) has provided guidance on the enforceability of “best endeavours” and “all reasonable endeavours” clauses. In doing so, a distinction was drawn between a clause in which the object is so uncertain that the clause would be incapable of creating a binding obligation and a clause that is imprecise in scope but is binding as its object can be placed in context.

BACKGROUND

The case concerned the contents of a “letter agreement” (the agreement) between Blackpool Airport Ltd (BAL) and low cost airline Jet2.com Ltd (Jet2). The agreement, which was to remain in force for 15 years, set out the terms under which Jet2 would operate its services from Blackpool Airport. Under clause 1 of the agreement, the parties agreed to use their “best endeavours” to “promote” Jet2’s services from Blackpool Airport. BAL further agreed to use “all reasonable endeavours” to provide a cost base to facilitate Jet2’s low cost pricing. The parties agreed that for the purposes of the case the two expressions were to be treated as synonymous.

During the first four years of the agreement, BAL allowed Jet2 to operate services to and from Blackpool Airport outside the airport’s normal opening hours. This was important to Jet2, as the flexibility allowed the airline to keep costs as low as possible. When BAL ended this arrangement, Jet2 brought the present case on the basis that BAL was in breach of its obligations under clause 1. BAL maintained that the use of “best” or “all reasonable endeavours” did not require BAL to act against its own commercial interests.  

The first instance judge, in finding in favour of Jet2, considered that to “promote” Jet 2’s services in clause 1 should be read as to “advance” in general terms Jet2’s business, and that “best endeavours” limited BAL’s freedom to rely on its own commercial interests. BAL appealed.

DECISION

In a majority decision, the Court of Appeal upheld the first instance judgment. Each judge emphasised the need for certainty with regard to “endeavours” clauses. They agreed that clause 1 of the agreement should only be enforceable if the object of clause 1 could be defined sufficiently. The judges differed in opinion on whether this was the case in the present circumstances.

Moore-Bick and Longmore LJJ considered that the object of clause 1 was sufficiently precise to be enforceable. At first instance, weight was given to evidence that the parties were both aware of the need for flexibility in scheduling for a low cost airline to succeed. Accordingly, flexible airport opening hours could be considered as falling within the scope of “promoting” the airline as required under clause 1.

Dissenting, Lewison LJ reached the opposite conclusion. He pointed towards the detailed list of obligations on the parties under clause 2 of the agreement, which made no mention of opening hours. He considered that as the agreement did not specifically address opening hours, regardless of their proven importance, the agreement could not be said to include them. If the agreement was to cover opening hours, Lewison LJ argued, this would have been evident from clause 2.  

COMMENT

Moore-Bick LJ drew a distinction between a clause in which the object is so uncertain that the clause would be incapable of creating a binding obligation, and a clause that is imprecise in scope but is binding as its object can be given practical context. In this case, the majority considered that clause 1 of the agreement fell within the latter definition. The dissenting opinion of Lewison LJ demonstrates, however, how fine the divide is between the two in practical terms.

When entering into an agreement containing a clause requiring best or reasonable endeavours, it would be in both parties’ interests to elaborate their respective obligations as much as possible. It is clear from this case and from previous authorities that best endeavours can include the requirement for a party to act against its own financial interests. All the more reason to set out with clarity what are the agreed limits of a party’s endeavours.