A recent Court of Appeal decision has considered reasonable endeavours and good faith obligations in the context of more detailed obligations set out in the contract. The case of Bristol Rovers (1883) Limited v Sainsbury's Supermarkets Limited confirms that the general obligations of reasonable endeavours and good faith can be curtailed by the more specific terms of the contract. It serves as a reminder to retailers that if they require certain steps to be taken, those steps should be set out specifically in the contract rather than relying on the other party to use their reasonable endeavours.
On 28 March 2011, Bristol Rovers and Sainsbury's entered into a conditional contract for the sale of the football stadium to Sainsbury's. The agreement contemplated the construction of a retail led mixed use development including a Sainsbury's superstore. From mid-2013 however, Sainsbury's realised that the economics of the deal had changed, and wished to terminate the agreement if it lawfully could.
Completion of the agreement was conditional on, among other things, Sainsbury's obtaining planning permission which permitted deliveries at any time from very early in the morning to very late at night. If planning permission was granted subject to restrictions on the timing of deliveries, Sainsbury's were only obliged to pursue an appeal against it if planning Counsel confirmed that an appeal had a 60% chance or greater of being successful. The agreement required Sainsbury's to use all reasonable endeavours to procure the grant of an acceptable planning permission as soon as reasonably possible and an obligation to act in good faith in relation to their obligations under the agreement.
Planning permission was granted subject to restrictions on the timing of deliveries. Sainsbury's agreed to make a section 73 application to remove the condition restricting the timing of deliveries without obtaining Counsel's opinion on the chance of success (the parties both believed that this was an appeal for the purposes of the agreement). The section 73 application was refused. Sainsbury's made a second section 73 application, which it then withdrew when planning Counsel advised that the prospects of success were only 55%. Sainsbury's then exercised its right to terminate the agreement.
Bristol Rovers argued that Sainsbury's had acted in breach of contract because it had refused to allow Bristol Rovers to make a section 73 application on Sainsbury's behalf. It argued that this was a breach of the obligation to use all reasonable endeavours to obtain an acceptable planning permission as soon as reasonably possible and a breach of the duty to act in good faith.
The Court of Appeal held that the reasonable endeavours obligation is curtailed by the clause in the contract which only obliges Sainsbury's to lodge a section 73 application where planning Counsel has advised it has a 60% chance of success. As this had not happened, Sainsbury's were not obliged to lodge a section 73 application and in those circumstances, did not have to allow Bristol Rovers to make the application. Its obligations were set out in the contract and the reasonable endeavours obligation did not require Sainsbury's to go further. In addition, reliance on a contractual provision is not a lack of good faith.
This case highlights that detailed drafting can curtail the general obligations in contracts. It also serves as a reminder to retailers to make contracts conditional if a limit on delivery times would adversely affect business.