A reminder of the use of endeavours clauses

The Court of Appeal's recent decision in Bristol Rovers (1883) Ltd v Sainsbury's Supermarkets Ltd [2016] EWCA Civ 160 illustrates the value of including specific provisions in a contract order to set boundaries on otherwise potentially open-ended endeavours obligations.

Bristol Rovers football club entered into a contract to sell its football stadium to Sainsbury's, subject to a number of conditions precedent, one of which related to the grant of planning permission. The contract required Sainsbury's to 'use all reasonable endeavours to procure the grant… as soon as reasonably possible'.
It further provided that Sainsbury's 'may in its absolute discretion pursue an appeal' against a refusal, but shall only be obliged to do so if planning counsel confirmed that such an appeal had at least a 60 per cent chance of success (paragraph 2.11).

The Court of Appeal rejected Sainsbury's argument that its obligation to use all reasonable endeavours came to an end with an initial planning application that was refused or an unsuccessful appeal. However, it went on to say that Sainsbury's was not in breach by failing to lodge a further application because the all reasonable endeavours clause was limited by the specific provision that it was not obliged to do so unless planning counsel advised that it had a 60 per cent chance of success, and that had not occurred.

The Court of Appeal also rejected Rovers's argument that the obligation required Sainsbury's to consent to Rovers's failing its own application in circumstances where Sainsbury's would not itself be obliged to file such an application. Such an interpretation, the court said would 'cut straight across paragraph 2.11 if not wholly negate it'.

The case illustrates some of the practical dos and don'ts of negotiating endeavours clauses, including that parties should:

• Consider specifying steps that are (or are not) required to fulfil the obligation, for example pursuing legal action or appeals;

• Consider setting out the minimum and maximum spend for pursuing an obligation;

• Consider stating how long the endeavours must continue for, for example by specifying a long-stop date;

• Not assume they can always consider their own commercial interests when deciding the steps they are required to take;

• Ensure the object of the endeavours is clearly defined; and

• Remember, if an obligation isn't softened by 'endeavours' wording, it is likely to be construed as an absolute obligation. SJ

Celina McGregor is a senior associate and solicitor advocate at Herbert Smith Freehills. McGregor is also president of the Junior London Solicitors Litigation Association