I came across this article in a legal update in Ashurst’s Corporate Snapshots publication dated 21 February 2013 and as I do a bit of work from time to time reviewing sale contracts or deeds of settlement etc I thought it was pretty relevant.
In Foster v Hall [2012] NSWCA 122, the NSW Court of Appeal has handed down a decision interpreting a “best reasonable endeavours” clause. Although the case involved a contract for the sale of land, the approach taken by the Court has a much wider reach as this type of wording appears in many other types of contracts.
In Foster, the contract for the sale of land contained a clause requiring the parties to use their “best reasonable endeavours”. The Court found that the addition of the word “best” to the expression “reasonable endeavours” raised the required standard somewhat higher than that imposed by a simple “reasonable endeavours” obligation. However, the Court did not consider that the word “reasonable” added anything to the obligation to use “best endeavours”. The obligation to use “best endeavours” does not require a person to go beyond what is reasonable in the circumstances or to disregard his or her own interests.
The Judge stated that a party subject to the obligation is bound by “steps which a prudent, determined and reasonable [party], acting in his own interests and desiring to achieve [the results specified in the contract] would take”. I know a lot of lawyers in drafting agreements like to play round with words in front of “endevours” and good to read something of a plain english interpretation.
Your thoughts?
Adrian Hunter 