28 March 2014

In February 2011 Andrew Olins' dream to own and drive a Bristol 405D drophead coupe looked like it was going to come true. He saw an advert from Bristol Cars offering a 405 as a restoration project and agreed to buy the car and pay for the works. Bristol Cars went into administration before the project started and so the fixed price contract was actually made with the phoenix company in June 2011. Unfortunately they did not even start on the works, let specialist staff go and by a year after the advert Mr Olins ran out of patience at the lack of progress and instructed the litigation department of his firm to act in the dispute. 

By May 2012 there was a signed settlement agreement which contained a condition precedent requiring Mr Olins to use 'reasonable endeavours' to enter in to an agreement to restore the car with a third party, Jim Stokes Workshops Limited, which had been identified as having the necessary specialist skills.

The court had to decide whether the condition precedent to use reasonable endeavours was enforceable. In general, an obligation to use reasonable endeavours to achieve a particular object is enforceable, provided that:

  • (i) the object of the endeavours can be ascertained with sufficient certainty
  • (ii) there are sufficient objective criteria by which the performance of the “endeavours” obligation can be evaluated. 

Those two essential requirements of certainty of object and a yardstick by which to measure the endeavours are applicable across the board, whatever the object may be. When applied to an obligation to use endeavours to enter into a future agreement, the general result is that an “agreement to agree” a contract between A and B is not enforceable – 'an undertaking to use endeavours to agree is no different from an undertaking to agree, or to try to agree, or to negotiate with a view to reaching agreement; all are equally uncertain and incapable of giving rise to an enforceable legal obligation'. In this case, the reasonable endeavours obligation in the settlement agreement between A and B was in relation to B entering an agreement with C. The answer to whether or not that was enforceable was not clear from previous cases. However, the judge held that the same reasoning applied, the object was still a future agreement whose terms were wholly uncertain.

The judge did leave open the possibility that where the obligation between A and B relates to entering into a contract with C it could be enforceable. If the essential terms of the prospective agreement with the third party are identified in advance, there may be the requisite certainty of object and sufficient criteria could be included by which to judge the endeavours. She also confirmed that there comes a point when a party under a reasonable endeavours obligation can correctly take the view that it can do nothing further in terms of reasonable steps to achieve the object and, at that point, it is no longer obliged to try.

For more information, contact Helen Scott Lawler or Brioney Thomas.

Key contact

Helen Scott-Lawler

Helen Scott-Lawler Partner

  • Head of Food and Drink
  • Commercial
  • Intellectual Property and Media

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