Introduction
In commercial property contracts legal ‘jargon’ is commonly used, and sometimes people do not know the meaning of what they are saying. Those who are involved in this sector will have heard the terms “reasonable”, “all reasonable” or “best endeavours”. Clearly, they are different thresholds, but to what extent and what are you promising when you say them?
Legal ‘Jargon’
One term, possibly the most common, is ‘reasonable’. This term comes up in nearly every contract within commercial real estate, it simply means you will take necessary actions to fulfil your promise. It is not to be understated, this is still trying, but you will not go above and beyond. You will still be required to do what is expected, such as attending meetings or making sure to bring up reasonable concerns with the relevant parties.
The previous term differs from “best endeavours”, which would be the other end of the spectrum. This means that you are setting a much higher standard and promising you will go above what would be expected of a ‘reasonable’ person in your position. This could consist of incurring financial costs or other inconveniences that a reasonable person in your position would not do. Of course it is not guaranteeing the task will be completed, but it is as near as you can come. The only obstacles that would stop you would be those out of your control.
Another term, often believed to mean the same as “best endeavours”, is “All reasonable endeavours”. In fact, it is a middle ground between the two previous terms, although this term is certainly more ambiguous. Case law has indicated that unless specifically worded otherwise, the court will objectively consider how a reasonable developer would act in the same position. However, they do recognise that a number of commercial interests may be required, but it is not as likely for somebody under an all reasonable obligation to inconvenience themselves for a commercial interest than a best endeavours obligation.
How to use these terms in practice
These terms vary depending on the situation the individuals are in; the specifics of the contract may make something reasonable in one contract and not another. When negotiating endeavours obligations, it is vital to take these steps into account:
- Outline specific actions or steps.
- Specify timings for obligations.
- Include an interpretation clause.
- Include a dispute resolution clause.
- Tailor the obligation to meet your circumstances.
It is vital to ensure that you pick the correct term that fits the development agreement and the risk levels that come with it. Make sure to consider the urgency of the project and work with legal advisors who can protect your interest so you can avoid costly disputes.
