You may have seen the reports on the case of Ampurius NU Homes Holdings vs Telford Holdings which was in the courts this July. Its been reported as a case amongst several on the thorny issue of what is meant by the words "using reasonable endeavours".

That is fair enough given the facts which related to Telford Homes entering into a contract to develop property ( commercial and residential buildings ) with a view to Ampurius taking long leases of the property and subletting some of the buildings. However the financial crisis hit Telford Homes, and they stopped work in March 2009 (having started) hoping to resume when they were able to. After 18 months Ampurius who had been in discussions with Telford about resuming the works had enough, tried to terminate the contract claiming Telford were in repudiatory breach and claimed damages -that is the refund of deposits paid to Telford , interest on this and other sums spent by Ampurius.

There were issues over whether Telford was in breach after all the banking crisis was not of their making; was Ampurius now after 18 months of on and off discussions really able to terminate the contract and what it could recover?

The end result was the Court decided Telford could not claim they were using reasonable endeavours to progress the works as the reference to reasonable endeavours covered both a due diligence requirement (i.e. progressing the works) and as well only covered issues that related directly to undertaking the works on site (i.e. adverse weather). It did not cover the underlying funding for the works. Moreover as Ampurius had throughout taken part in discussions with Telford during those 18 months on a without prejudice to their rights basis, Ampurius's claim was allowed.

So the bottom line is not having the money to do the work may not be a defence to a claim. Make sure if you hit a cash crisis on a project you find out whether its a temporary blip or fatal, and whether you are the client/tenant or developer/landlord/contractor decide what you intend to do as quickly as you can.

For what seems to have been in the Ampurius vs Telford case a speculative development consider what might happen if funding dries up and provide for this in the contract. The financial crisis may or may not have been foreseeable in 2009. We are in it now though and this case is a warning to take it into account as part of the dynamics of your project.