‘Reasonable endeavours’ is a phrase so commonly associated with lawyers and legal advice, that it is only slightly less frustrating to hear than ‘it depends’. Reasonable endeavours is often used as an exception clause, where one party's failure to do or not do something would normally amount to a breach of contract; it is applied in circumstances where the parties recognise it is acceptable to merely try and fulfil that obligation, rather than to insist on absolute performance.

A duty to use reasonable endeavours is appropriate where it is unclear how burdensome it will be to try and achieve a particular outcome, or if one party believes it is not being sufficiently rewarded to cover the cost of achieving a particular outcome.

The Supreme Court has recently considered how a duty to use reasonable endeavours impacted a force majeure clause in a shipping contract. In the case of RTI Ltd v MUR Shipping BV
[2024] UKSC 18, the war in Ukraine and subsequent financial sanctions had made it impossible for one party to make timely payments in US dollars - triggering a force majeure event. The contract explained that a force majeure event did not occur if the affected party (the party due to receive the payment), could use reasonable endeavours to overcome the force majeure event. 

In this case, the party at fault offered to make the same payment in euros rather than US dollars, also offering to bear the cost of any fees and losses associated with converting the currency. The question then arose, whether a duty to use reasonable endeavours to overcome the force majeure event, obliged the affected party to accept the replacement currency - a form of non-contractual performance by the party at fault.

The Supreme Court considered the history of force majeure clauses and ultimately concluded that the affected party had a contractual right to receive payment in US dollars, despite the alternatives offered. Whilst the affected party was under a duty to use reasonable endeavours to overcome the force majeure event, this did not extend to a duty to waive its contractual right to receive payment in US Dollars: it did not oblige the affected party to accept payment in euros. This was the conclusion of the Supreme Court, even though there was no detriment to the affected party if it received the payment in euros rather than US dollars. The affected party was entitled to insist on payment in US dollars and to invoke the force majeure clause.

The case is important because it confirms, in the absence of express wording, that a reasonable endeavours proviso does not require one party to accept an offer of non-contractual performance. Contractual performance means the performance of the contract according to its terms and does not oblige a party to accept a different outcome.

Practical implications for your contracts

The Supreme Court was clear that parties have the freedom to contract on their own terms. It is therefore possible to draft obligations into your contracts, to make clear that reasonable endeavours to overcome a force majeure event will include a duty to accept non-contractual performance in defined circumstances. However, it is important those terms are drafted clearly and unambiguously to explain whether alternative methods of delivery or alternative outcomes will amount to satisfactory performance. 

We often use the practical example of a commitment to meet at a specified time and location. If one party misses the bus/train, it might be expected to incur a taxi fare to make sure it arrives on time. But in what circumstances might the other party agree to meet halfway or online, for the meeting to go ahead?

It is important to consider:

• What steps can reasonably be taken to ensure contractual performance?
• What reasonable alternatives might still achieve the same result - without detriment?
• Should there be an expectation that each of the parties will compromise?

For more information

If you would like any assistance drafting your contract requirements or to discuss the impact of a reasonable endeavours proviso, please contact me for further information.