Force majeure and reasonable or best endeavours

A case in the High Court on the effect of a force majeure clause sheds light on what it means when we agree to use reasonable (or best) endeavours.

The case background

A shipowner had agreed to deliver grain monthly to a Russian client in return for payment in US dollars.  When US sanctions prevented the shipowner from receiving US dollar payments from the Russian client, it claimed that the contract was void for force majeure.   The Russian client litigated, arguing that the contract defined force majeure as only those events which “[could] not be overcome by reasonable endeavours from the Party affected”.  It argued that the shipowner should have accepted payment in euros.   Whilst this sounds sensible, the court rejected that argument.

The court’s decision

The court said that, where a party agrees to use reasonable endeavours, it has still only done so within the limits of the actual agreement between the parties.  In this case, the currency of payment was an express and important term and therefore the shipowner could not be obliged to accept payment in euros.   The judge made it clear that the parties are not required to choose between those terms of the agreement they want performed and those they can live without in order to make the contract work.

Thus, a duty to use reasonable endeavours does not require a contracting party to accept a change to the contract.  

This is consistent with how the courts have defined both reasonable endeavours – “what … a reasonable and prudent person acting properly in their own commercial interest and applying their minds to their contractual obligation” would do to try achieve the objective – and best endeavours –  a duty “to take all those steps … which are capable of producing the desired results … being steps which a prudent, determined and reasonable [person], acting in his own interests and desiring to achieve that result, would take”. 

What does this mean for businesses?

In practical terms, the lesson is that when businesses are asked to give reasonable or best endeavours, they are not stepping into the unknown, instead they are promising to try to achieve what they have already signed up to – within the bounds of their own interest (with reasonable endeavours) but with no limit on the steps to be taken and little regard to the cost (with best endeavours).  Clearly, a promise to use reasonable endeavours to achieve what one has already agreed to should not be difficult to give; greater care must be taken if agreeing to use best endeavours.

Case reference – MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm)

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