Jet2.com Limited v Blackpool Airport Limited
In a recent Court of Appeal decision, Blackpool Airport was held to have been in breach of an obligation to use best endeavours in relation to promoting Jet2’s business and the Court made it clear that, in appropriate circumstances, such an obligation may well require a party to act to its own commercial detriment.
The parties had entered into a 15 year contract in the form of a letter agreement. Clause 1 of this agreement stated that there was:
“An obligation on both parties to cooperate together and use their best endeavours to promote Jet2.com’s low cost services from Blackpool Airport.”
For the first four years, BAL allowed Jet2 to arrive and depart outside the normal operating hours of 6am to 8pm. In an attempt to improve its profitability, BAL then refused to accept flights outside such hours and gave Jet2 just one week to change its schedules. As a result of the best endeavours clause, the key question before the Court was whether BAL was under an implied obligation to accept flights from Jet2 outside the standard operating hours, when there was no express term requiring this and it would damage BAL’s commercial interests.
In reaching the decision to uphold Jet2’s claim and holding that BAL was required to accept flights outside the normal operating hours, there were a number of factors at play:
- The “best endeavours” wording was seen as BAL accepting a risk that there could be some resulting financial cost or loss
- The Court made reference to some of the pre-contract negotiations and documentation which indicated that the parties accepted the need for maximum flexibility to support a low cost airline such at Jet2
- BAL had, in fact, allowed the flights to land and take off outside normal operating hours for four years
- In the overall contractual context, the implied term alleged by Jet2 was felt to be necessary in order to give commercial effect to the agreement reached by the parties
One of the Court of Appeal judges dissented and felt that there was no implied term to accept flights outside of the normal operating hours of the airport on the basis that the clause was too uncertain to be interpreted properly by a Court. He followed a more traditional approach by arguing that, given the number of express obligations set out in the agreement, the absence of an express right for Jet2 to operate outside normal operating hours indicated that this was not a contractual term that could be implied. By contrast, the other judges involved in this case felt that the basic obligation was sufficiently certain to be given legal effect, although the test for an alleged implied term was a difficult one for the Court to evaluate.
The decision in this case supports the recent trend whereby English Courts are keen, wherever possible, to uphold an agreement between parties to use reasonable or best endeavours to achieve a particular objective. Those negotiating and drafting commercial contracts should also bear in mind that:
- There is no presumption that a “best endeavours” or “reasonable endeavours” clause will not be upheld where the party with the obligation would incur loss or some other commercial damage in carrying out the obligation
- Pre-contract events/documentation may well be relevant when it comes to interpreting the specific meaning of the clause
- Parties should always try to set out in the contract their underlying commercial aims/intentions, as this may help to influence a Court in upholding or rejecting a claim based on reasonable/best efforts
- In addition, parties are often lazy and rely on reasonable/best endeavours clauses rather than spelling out the specific obligations which are to be undertaken – it will usually be safer to specify what action is and is not required
- In this case, the Courts were apparently more willing to uphold an implied obligation on the basis that the alleged implied term did not require BAL to incur expense in relation to a third party but was only being asked to act in relation to a matter within its own control (i.e. the operation of its own airport
- One of the likely arguments against upholding a best endeavours clause is that it is worded so broadly as to be too uncertain to interpret in practice, so it is vital that the key commercial aims of the clause are set out in the agreement to give the Court confidence to interpret its meaning