Contract boilerplate clauses: do they mean anything?

Parked at the back of most commercial contracts are what is known as "boilerplate" or standard clauses which people tend not to take too seriously. Does it really matter whether there is a "best endeavours" clause or a "reasonable endeavours" clause? Yes.

In a recent UK case a "reasonable endeavours" clause had significant consequences.

In Rhodia UK Ltd. v Huntsman International Llc [2007] EWHC 292 the English High Court Judge said:

"[Do] "best endeavours" and "reasonable endeavours" mean the same thing. As a matter of language and business common sense... one would surely conclude that they did not. This is because there may be a number of reasonable courses which could be taken in a given situation to achieve a particular aim. An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all the reasonable courses he can. In that context, it may well be that an obligation to use all reasonable endeavours equates with using best endeavours ...an obligation to use reasonable endeavours is less stringent than one to use best endeavours...

where the contract actually specifies certain steps have to be taken (as here the provision of a direct covenant if so required) as part of the exercise of reasonable endeavours, those steps will have to be taken, even if that could on one view be said to involve the sacrificing of a party's commercial interests. "

In this case, Rhodia sued Huntsman for a declaration that Huntsman had failed to use reasonable endeavours, as it had agreed to do, to take over responsibility for an energy supply contract (involving millions of pounds) with a third party. Rhodia succeeded.

Huntsman had refused to provide a guarantee for a subsidiary company and the Court found this was not reasonable.

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