Endeavouring to create certainty?

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Parties often qualify their obligations in a contract by using the words "best" or "all reasonable" endeavours. However, such a clause only has meaning if the underlying obligation is clearly defined. If it is uncertain, then the entire clause will be unenforceable. Alternatively, it may turn out to be enforceable but much more onerous than anticipated. Such a situation recently arose in the case of Jet2.com v Blackpool Airport Limited.

What has happened?

Jet2.com (a low cost airline) entered into a contract with airport operator Blackpool Airport Limited ("BAL"). The parties agreed to "co-operate together and use their best endeavours to promote Jet2.com’s low cost services". BAL agreed to "use all reasonable endeavours to […] facilitate Jet2.com’s low cost pricing".

For four years, BAL allowed Jet2.com to use Blackpool Airport outside usual operating hours. This flexibility was critical to Jet2.com, but caused BAL to incur significant additional costs at a time when the airport was already being run at a loss.

BAL eventually served one week’s notice on Jet2.com, stating that flights would no longer be accepted outside of normal operating hours. Jet2.com asserted breach of contract and sought damages, as well as a declaration that BAL be obliged to allow flights outside normal hours.

The Court of Appeal held that BALwas in breach of its "best endeavours" cooperation obligation by not letting Jet2.com use the airport outside of normal hours, and awarded damages to Jet2.com. However, it did not grant the declaratory relief sought.

What are the key points?

The Court of Appeal considered the enforceability of a "best endeavours" clause:

The court first considered the extent to which the factual background could be used to clarify the objective of the endeavours clause.

The majority of the Court of Appeal concluded that BAL’s obligation to use best endeavours extended to doing "all that it reasonably could to enable that business to succeed and grow". Taking into account the factual background, that did require include allowing flights outside normal operating hours.

The Court of Appeal also considered whether a "best endeavours" obligation could be so onerous that it required a party to act to its own financial detriment.

On the facts, the court concluded that BAL was wrong to withdraw Jet2.com’s ability to operate outside normal hours. However, the court recognised that in other circumstances the obligation might not extend to allowing Jet2.com to fly outside normal hours – for example, if it became clear that Jet2.com would never be able to operate a low-cost service profitably.

Lewison LJ dissented, observing that the agreement made no specific mention of operating hours. He considered that the clause was vague, and the scope of BAL’s’ obligations too broad. In his view, the clause was too uncertain to be enforceable.

How will this affect me?

When negotiating contracts, parties often spend a great deal of time agreeing the lengths they should go to in attempting to meet contractual obligations. Should they use "reasonable endeavours", "best endeavours", or some other standard? As this case shows, the most important thing to focus on should be the certainty and clarity of the obligation itself. If it is too vague it will be unenforceable; or, at the other extreme, it might turn out to have far wider scope than anticipated at the time of drafting.

What are the next steps?

Given the commercial significance of this decision, it seems likely that one or both of the parties will seek permission to appeal. The Court of Appeal was not unanimous, and Lewison LJ’s dissenting judgment provides scope for an appeal to the Supreme Court.

BLP Perspective

To some extent, fairness seems to have prevailed in this case; it would have been unjust to allow BAL to prevent Jet2.com from use the airport outside of normal hours on such short notice, where no real change had occurred in BAL’s circumstances to warrant the change in position.

Nevertheless, the implications of upholding such a broadly worded contractual obligation are concerning. BAL contracted to help "promote Jet2.com’s low-cost services" - as Lewison LJ said, "leaving aside the question of flight times, to what else does the obligation extend?"

On balance, the interests of both parties would have been better served had they agreed more specific and certain objectives from the outset. This is a lesson all negotiators and draftsmen would do well to heed.

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