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PRACTICE NOTE ON THE MEANING AND ENFORCEABILITY OF ‘BEST ENDEAVOURS’ CLAUSES IN SPORTS MARKETING AGREEMENTS

A clause often found in Sports Marketing Agreements, such as Sponsorship and Merchandising Agreements, is a so-called ‘best endeavours’ clause. These clauses, which are generally known in the United States as ‘efforts’ clauses, can prove problematic, in practice, and should always be used with great care and circumspection. ‘Best Endeavours’ clauses come in various forms and guises ranging from pure and unadulterated ones requiring the party concerned to use its ‘best endeavours’; or in watered down variations requiring the party concerned to use either ‘all reasonable endeavours’ or just ‘reasonable endeavours’. The inclusion of the term ‘best endeavours’ in a clause originally placed an onus on the obliged party to “broadly speaking, leave no stone unturned.” See Sheffield District Railway Co. v Great Central Railway Co. (1911) 27 TLR 451. This very onerous obligation has been lessened - to some extent - over the years in subsequent English Court cases to allow for the concept of standards of reasonableness to be introduced into its meaning. In other words: “‘best endeavours’ are something less than the efforts which go beyond the bounds of reason, but are considerably more than casual and intermittent activities.” See Pips (Leisure Production) Ltd. v Walton (1980) 43 P&CR 415. What is now required is that parties must do “all that a reasonable person reasonably could do in the circumstances” (Pips case, above). They must take all the steps that a reasonable person “acting in their own interest and desiring to achieve that result would take.” See IBM UK Limited v Rockware Glass Ltd [1980] FSR 335 (CA). An obligation to use ‘best endeavours’ probably requires a party to take all the reasonable courses they can. They must act honestly, reasonably and make a positive effort to perform the relevant obligation. What actually amounts to ‘best endeavours’ must be considered at the time of performance or breach of the undertaking and not at the time of the creation of the contract. See Midland Land Reclamation Ltd and Leicestershire County Council v Warren Energy Limited 1995 ORB No. 254. In the case of a company, the required standard is that of a “reasonable and prudent board of directors, acting properly in the interest of their company and applying their minds to their contractual obligations.” See Terrell v Mabie Todd & Co. Ltd (1952) 69 RPC 234. In other words, a company must do all that is reasonable in the particular circumstances. According to Terrell, this obligation does not, however, extend to a situation where a company must put itself at risk of financial ruin, including bankruptcy, to fulfill its obligation. However, in the recent case of  Jet2.Com Limited v Blackpool Airport Limited [2012] EWCA Civ 417, the Court of Appeal has changed this point of view, holding that there may be circumstances,  in which to fulfil its obligations under a ‘best endeavours’ clause, a company may have to act against its own financial interests. In that case, Jet2.Com operated a low cost airline and entered into a 15 year agreement with Blackpool Airport Limited to provide a new service from Blackpool to Belfast. The relevant clause in that agreement read: “Jet2.com and BAL will co-operate together and use their best endeavours to promote Jet2.com’s low cost services from [Blackpool Airport].” A dispute arose as to whether this required Blackpool Airport to allow Jet2.Com to operate flights outside normal opening hours. Reviewing all the particular circumstances of the case, two of the three Appeal Court Judges held that the obligation did extend to keeping the airport open outside normal hours, subject to any right Blackpool Airport might have to protect its own financial interests. The extent to which a person or company, who has undertaken to use their “best endeavours”, can take into account their own financial interests depends upon the nature and terms of the contract concerned. The Court of Appeal rejected Blackpool Airport’s argument that it was not obliged to act in a way that caused it a loss, but the Court did accept that there might be circumstances where Blackpool Airport could no longer be expected to incur further losses in promoting Jet2.com’s services, if the latter’s business was failing. Incidentally, the third Appeal Court Judge considered that the ‘best endeavours’ clause was too vague to be enforceable in the particular case, as Jet2.com’s construction went beyond “interpreting” the contract and required the Court, in effect, to “make” a contract which the parties had not themselves made! So, when using various versions of  ‘best endeavours’ clauses, it is crucial for the parties concerned to draft them clearly and also to have a clear understanding of their precise meaning and legal effect in the particular commercial context and circumstances. In other words, applying the ruling in Jet2.Com Limited v Blackpool Airport Limited to sporting situations, the parties need to be fully aware of the nature and extent, legally and practically speaking, of the obligations that the inclusion of such clauses in Sports Marketing Agreements may require of them. For further information and advice on Sports Marketing Agreements, please contact Amrit Johal on ‘This email address is being protected from spambots. You need JavaScript enabled to view it.
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Dr. Rijkele Betten

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Prof. Guglielmo Maisto
Maisto e Associati, Milano

Dr. Dick Molenaar
All Arts Tax Advisors, Rotterdam

 

Mr. Kevin Offer
Hardwick & Morris LLP, London

Mr. Mario Tenore
Maisto e Associati, Milano

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