The owner of a mining project agreed to use reasonable endeavours to obtain a “Senior Debt Facility” and to procure the restart of mining activities. It subsequently claimed the obligation was unenforceable because there were no objective criteria by which the court could judge the reasonableness of its endeavours to obtain the Facility.
The court said it should almost always be possible to give sensible content to an undertaking to use reasonable endeavours (or “all reasonable endeavours” or “best endeavours”) to enter into an agreement with a third party. Uncertainty of object is not a problem, as there is no inherent difficulty in telling whether an agreement with a third party has been made. Whether the party giving the undertaking has endeavoured (or used its best endeavours) to make such an agreement is a question of fact which a court can decide. It may sometimes be hard to prove an absence of endeavours, or best endeavours, but difficulty in proving a contractual breach (the burden of which is on the party alleging non-compliance) is an everyday occurrence and not a reason to hold that there is none. Any complaint about lack of objective criteria could only be directed to the issue of whether the endeavours used were “reasonable”, or whether there were other steps which it was reasonable to take so that it cannot be said that “all reasonable endeavours” have been used. The court thought, however, that, where the parties have adopted a test of “reasonableness”, they were deliberately inviting the court to make a value judgment which sets a limit to their freedom of action.
It also noted that whether, and if so to what extent, a person undertaking to use best endeavours can have regard to their own financial interests depends on the nature and terms of the relevant contract: the same must equally apply where the undertaking is to use “all reasonable” endeavours.
And it said that a duty to act in good faith, where it exists, is a modest requirement that does no more than reflect the expectation that a contracting party will act honestly towards the other party and will not conduct itself in a way which is calculated to frustrate the purpose of the contract or which would be regarded as commercially unacceptable by reasonable and honest people. It is a lesser duty than the positive obligation to use all reasonable endeavours to achieve a specified result, which the contract in this case imposed.