All reasonable endeavours – obligations not limited by commercial interests
JET2.COM v BLACKPOOL AIRPORT [2011]
The High Court was asked to consider whether an obligation to use ‘all reasonable endeavours’ required a party to act against its own commercial interests. In this case, the answer was ‘yes’.
facts:
- In 2005, J, a low-cost airline, entered into a 15 year contract with Blackport Airport ('(BAL') to operate out of Blackpool Airport. The contract was expressed in “broad but not uncertain terms”. It did not specify the hours of airport operation or the hours during which BAL had to accommodate J’s flights. However, for some years J operated a flight schedule outside of BAL’s published normal operating hours, consistent with the flexibility required by low cost airlines (in order to secure cheaper landing slots) and with BAL’s approval.
- In October 2010, following a change of ownership and seeking to improve profitability, BAL informed J that it would only accept flights during “normal [operating] hours”. At short notice J had to divert flights to Manchester airport, incurring significant costs and customer inconvenience.
- J sought and obtained an injunction requiring BAL to operate the same schedule as it had for winter 2009.
- The contract contained a clause requiring the parties to use their “best endeavours” to promote J’s services from the Airport and requiring BAL to use “all reasonable endeavours” to provide a cost base for J to facilitate the airline’s low cost pricing.
- The parties agreed that in this case ‘best endeavours’ and ‘all reasonable endeavours’ should be given the same meaning (although query whether that is actually correct?).
- J claimed that BAL’s actions were in breach of contract. BAL countered that the ‘all reasonable endeavours’ clause did not require it to sacrifice its commercial interests (ie to allow flights outside normal hours thereby incurring large losses) and so it was entitled to insist on its ‘normal [operating] hours’ as established by it from time to time.
decision:
- The High Court found BAL’s unilateral decision to operate only within normal hours to be in breach of contract. On the evidence and given the known operating requirements of low cost airlines, the Judge found that it was implied that J would not be restricted to ‘normal hours’ – the absence of such a provision from the contract was simply because it was “too obvious to mention” given the context of a low cost airline.
- The Court rejected BAL’s argument that it should not be required to sacrifice its commercial interests stating that it could not have been the intention that BAL should be able to “pick and choose” its actions in the light of what suited it financially. Many other extraneous factors affected the airport’s profitability and efficiency and these were risks that BAL would have been expected to assume. If the parties had intended BAL to be able to abandon performance for financial reasons this would have represented the “ultimate exclusion clause” and would have required very clear drafting.
- Importantly, the Court noted that the matters to which BAL’s ‘all reasonable endeavours’ related were entirely within its control ie whether to schedule flights outside of normal operating hours (thereby distinguishing it from cases where a party is reliant on a third party to achieve an objective and was therefore not required to sacrifice its own commercial interests).
- Although the Court accepted that some flexibility was required in operating hours, it refused to state what those operating hours actually are, leaving it to the parties to re-enter negotiations to find a longer term solution.
points to note:
- An ‘endeavours’ commitment (and therefore what it requires of a party) will not always mean the same thing from one contract to another. The Court re-iterated that the meaning of the expression ‘all reasonable endeavours’ and similar expressions are a matter of construction on a case by case basis and not “extrapolation from other cases”. Given that we operate a common law system based on the precedent set in cases, this is not particularly helpful. This emphasises the importance of clearly stating what a party’s obligations are and what steps they are required to take to satisfy those obligations rather than just relying on general, undefined terms.
- A party subject to an unattractive, unprofitable contract will not necessarily be able to escape or limit performance within its control simply because its obligation is expressed to be limited to ‘all reasonable endeavours’.
- BAL’s case was undoubtedly not helped by the facts that for the first four years following signature of the contract, it had allowed J flexibility on flight times and that after such a long period of time, it only gave J one week’s notice of the change. This was clearly unreasonable and probably swayed the Judge.
- Like many cases the decision is peculiar to its particular facts. In our view it would be wrong to draw the conclusion that an endeavours provision does not offer any protection from an unprofitable commitment. It is simply a matter of fact and degree according to the circumstances. As the Judge himself commented, BAL’s obligation to offer “wide and flexible hours” was not absolute.
- This decision went to appeal in 2012 - see Blackpool Airport v Jet2.com (CA).