28 Oct 2019

Exercises of contractual discretion


Agreeing to use "reasonable endeavours" to do something "as soon as reasonably practicable" is an enforceable obligation

Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Ltd [2019] EWCA Civ 823 (14 May 2019)

In this case, Abbeygate (a developer) appealed a decision of the High Court awarding Gaia damages of £1.4 million.

The High Court had held that Abbeygate had deliberately failed to fulfil its obligation to use reasonable endeavours within a certain time period meaning that it had no contractual obligation to make an overage payment of £1.4 million. Accordingly, the Court awarded this amount in damages to the Claimant for breach of the reasonable endeavours provisions in the contract.

Abbeygate’s appeal was based on an argument that it was entitled to give precedence to its own commercial interests when complying with the obligation to use reasonable endeavours to act as soon as reasonably practicable, contrasting the obligation to use "reasonable" endeavours with the more stringent requirement of "best endeavours".

The Court of Appeal disagreed. In analysing the judge's decision, it found that with or without questions of commercial interest, it was clear that Abbeygate had deliberately worked to a timetable designed to avoid the trigger for the overage payment arising.

Although this did not change the outcome, the Court of Appeal did state that questions of profitability should not always be left out of account in determining the extent of what constitutes reasonable endeavours.

Stephenson Harwood comment

This case highlights the importance of careful drafting of obligations to undertake reasonable endeavours in light of the factors which might be relevant to their performance. While it is not an easy exercise, the Court will evaluate whether reasonable endeavours have been used, and where it is clear that they have not, judgment will be given.



Ben Sigler

Ben Sigler

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Harriet Campbell

Harriet Campbell
Professional support lawyer

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