The Law Office of JM Donnelly

Jet2com Ltd. v Blackpool Airport 

• Introduction

• Facts

• Ruling

• Conclusion              

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Introduction

Aircraft transactions commonly involve a galaxy of players with divergent agendas and conflicting priorities. The successful consummation of aircraft transactions frequently require the participating parties to embrace compromises and grant concessions. It may happen therefore that where a party is required to fulfil a certain obligation or to procure a particular outcome, the counterparties agree to water down an absolute obligation and replace it with a commitment to ‘endeavour’ to achieve that outcome. Case law establishes three distinct kinds of ‘endeavour’ obligations: ‘best endeavours’, ‘all reasonable endeavours’ and ‘reasonable endeavours’ which together define a curve of decreasingly onerous obligations. In Jet2com Ltd v Blackpool Airport Ltd, the Court of Appeal addressed the meaning, scope and effect of the terms 'best endeavours' and 'all best endeavours' establishing that what a particular standard of obligation means in a specific context depends on the contractual definitions, the terms of the agreement and the commercial backdrop against which the obligation is set

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Facts

Blackpool Airport Ltd (BAL) entered into a 15-year agreement with low budget airline Jet2.com Ltd (Jet2). The letter of agreement set forth the terms on which Jet2 could operate from BAL. Pivotal to the dispute was the proper construction of Clause 1 of the agreement which employed the terms ‘best endeavours’ and ‘all reasonable endeavours’.  It imposed an obligation (i) on the parties to ‘co-operate together and use their best endeavours to promote Jet2.com’s  low cost pricing’ and (ii) on BAL ‘to use all reasonable endeavours to provide a low cost base to facilitate Jet2com’s low-cost pricing’. The agreement was silent on the issue of opening hours. During a four year period, Jet2 operated outside of normal operating hours. In 2010, BAL notified Jet2 that it could no longer facilitate Jet2 in operating outside its promulgated business hours. Jet2 instituted proceedings against BAL seeking both damages for breach of contract and  a declaration.   In the court of first instance, the trial judge gave judgment in favour of Jet2.  BAL appealed.

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Ruling

The Court of Appeal ruled in favour of Jet2 by a majority of two to one. It made the following findings:

• An obligation to use ‘best endeavours’ is legally enforceable provided that the object is defined with sufficient certainty. The terms ‘best endeavours’ and ‘all reasonable endeavours’ bore the same meaning as the parties had contemplated that the terms should be used interchangeably.

• The Clause 1 obligations were not uncertain and therefore were binding on BAL, although the Court admitted that defining their precise scope was a ‘more difficult question’. Reinforcing its view on this issue was the fact that offering flights outside normal business hours was integral to Jet2’s business model. Therefore, the court held that BAL’s obligations to use best endeavours meant that BAL had to do ‘all that it reasonably could to enable [Jet2’s] business to succeed and grow’ and this extended to opening the airport early and late.  

• Any question of best endeavours was most unlikely to arise before the agreement started to be performed. Once performance had begun, the party who proposes to change the status quo should have to justify that stance. BAL had operated out of hours flights for four years without difficulty; therefore, its change of stance required explicit justificaiton.

• On the issue of BAL’s right to protect its own financial interests, the court held that whether BAL was required to do this depended on the nature and the terms of the obligation in question. BAL could not, in the circumstances of the case, restrict the opening hours even if in so doing it incurred a lost.  However, the court conceded that the duty was not infinite and that if Jet2 were to lose money, BAL could not then be required to promote a failing business.

• With respect to the second obligation—to use all reasonable endeavours to provide a cost base to facilitate low-cost pricing—the majority ruled that the wording was ‘too opaque’ to yield a precise meaning.

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Conclusion

• The case departs from earlier decisions in that an earlier line of authority established that a party under an obligation to exercise ‘reasonable endeavours’ or ‘best endeavours’ was not thereby required to incur injury to its economic interests to fulfil a particular obligation.

• Where it is decided that the parties should use ‘best endeavours’ or ‘all reasonable endeavours’ to procure a particular outcome, then, to the extent that judicial exegesis attaches a specific meaning to these terms, such interpretation may be displaced by whatever meaning the parties intended should attach to the terms.

• Given the potential for disputes to arise from the construction of such terms as ‘best endeavours’ and ‘reasonable endeavours, the terms should be drafted with great care and contain not only precise definitions of the terminology used but also a description of the precise steps that are required to fulfil a particular obligation.

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