A duty to exercise “reasonable endeavours” is less onerous than “best endeavours” but still requires sacrifice says the High court.
Only lawyers surely are interested in “splitting hairs” you might think.
Think again as the distinction between “reasonable endeavours” and “best endeavours” in the case of Rhodia International Holdings Limited and Rhodia UK Limited v Huntsman International LLC had real practical and costly consequences.
In a dispute about a £15m energy bill, the court decided that Huntsman had breached its sale agreement by way of failing in its obligation to use its reasonable endeavours to provide a guarantee for a power contract.
The background to this was Huntsman had agreed to buy Rhodia, a chemicals company.
As part of the sale and purchase both parties had obligations to ensure all supplier contracts passed from Rhodia to Huntsman.
One contract was with Cogen, which sold power and steam from an on-site facility.
Cogen did not accept the transfer since the Huntsman subsidiary was a new company with no trading history or financial accounts. It asked for a parent company guarantee. This was refused. The argument over reasonable endeavours centred on Huntsman’s refusal to provide that guarantee and thus the transfer the obligations of the power contract from Rhodia.
The judge ruled that Huntsman was in breach of the sale agreement for not proffering a parent company guarantee or something similar.
Judge Flaux also concluded that though in previous cases it had been argued “reasonable endeavours “meant “best endeavours” he felt it did not necessarily follow in all cases.
Since this case was determined there have been further developments in case law which distinguishes "best endeavours" from "all reasonable enadeavours" and "reasonable endeavours".
Whether YOUR issue is one of the above depends on careful analysis and previous case law. Please contact us for specific advice to determine your own issue marking your request REASONABLE ENDEAVOURS FACTSHEET. We will advise you whether the obligations are absolute or not and whether they need to apply to the detriment of your commercial position or otherwise
