All too often we see ‘do it yourself’ contracts cobbled together by businesses that are either in a rush to please (or appease!) their clients, worried about the cost of hiring a lawyer to draft the contract or just generally don’t take it seriously.
While you can sometimes get lucky with basic contracts, you can also get very unlucky just by using the wrong two words.
Here’s an old but valuable insight on how the seemingly innocent wording ‘best endeavours’ in a contract can create unintended consequences when not considered carefully.
The insight begins in 2005 when Blackpool Airport struck a 15-year deal with Jet2 Airlines, an up and coming budget airline, to facilitate some of their flights.
All was going well for Blackpool Airport and Jet2 for the first 4 years. Jet2’s flight timetable was keeping the airport very busy…too busy in fact – the airport was staying open beyond its normal operating hours just to facilitate Jet2 and to keep them happy. You could say this was a good example of ‘scope creep’ from Blackpool Airport’s perspective as they were running at a loss to keep the wants and needs of Jet2 satisfied…not something they originally envisaged.
Blackpool Airport eventually decided that it couldn’t afford to keep the airport open outside of the normal operating hours to facilitate Jet2’s flights. It was at this point that the contract between Blackpool Airport and Jet2 came sharply into focus. The following clause made its way all the way up to the Court of Appeal:
“1. Jet2.com and BAL will co-operate together and use their best endeavours to promote Jet2.com’s low cost services from BA and BAL will use all reasonable endeavours to provide a cost base that will facilitate Jet2.com’s low cost pricing.”
Jet2’s position was this clause meant that Blackpool Airport must continue operating outside of normal business hours even if it’s causing the airport financial hardship. In their view, this is the level of service required when you say ‘best’ rather than ‘reasonable’.
Blackpool Airport argued that its obligation was limited to promoting Jet2’s services in the context of advertising and marketing them. They believed the contract was silent about the hours during which it would allow flights and that it was under no obligation to accept flights outside normal business hours. They also argued they were entitled to consider their own commercial interests when deciding what steps to take when exercising their best endeavours to promote Jet2’s services.
The Court of Appeal found in favour of Jet2 meaning Blackpool Airport was liable to sacrifice its commercial interests in favour of Jet2’s. The clause was not too vague to be enforceable.
So, what are the lessons?
- Too often “best endeavours” and “reasonable endeavours” clauses are used to reach an agreement without the consequences being fully worked out. That was the route to disagreement and costly litigation in Blackpool Airport’s case.
- If this type of clause needs to be used, it is worth making the effort to specify precisely what the obligations are/what both parties understand to be the meaning behind ‘best’ and ‘reasonable’. While this might seem a pain to do, it can prevent a lot expensive pain later!
I hope you’ve found this insight helpful, and if we can help you review or prepare your contracts please don’t hesitate to contact us.
