Legal Analysis: The Binding Nature of “Reasonable Endeavours” in Settlement Agreements
In the recent case involving Moussa Raymond Salem (“Moussy”) and his uncles Freddy and Beno Moussa Salem, the court examined the enforceability of a “reasonable endeavours” clause within a settlement deed dated 15 April 2016. This decision provides valuable insight into the legal implications of such clauses and underscores the importance of precise contractual language in settlement agreements.
Background
The dispute arose out of the division of the Salem family’s African Business, a trading enterprise involving food, tobacco, and textiles across several West African countries. A 2016 Settlement Deed aimed to resolve litigation between family members and included a staged resolution process:
1. A Conciliation Process to divide the business, which failed.
2. A fallback provision (Clause 6.5) requiring the parties to use “reasonable endeavours” to agree on a binding expert determination process to value and divide the African Business.
When Moussy sought to enforce Clause 6.5 in 2024, Freddy and Beno contended that it was unenforceable, either as an agreement to agree or due to a time limitation that expired in early 2017.
Key Legal Issues
1. Was Clause 6.5 enforceable, or was it merely an agreement to agree?
2. Did the obligation to use reasonable endeavours under Clause 6.5 impose a time-limited or ongoing duty?
Court’s Analysis
1. Agreement to Agree?
The court reaffirmed the principle that an agreement to agree is generally unenforceable because it lacks certainty. Clause 6.5 described an aspirational intent, where the parties agreed to attempt to negotiate a binding process for expert determination if the conciliation failed. The clause’s language, including phrases like “reasonable endeavours” and “currently anticipated,” indicated that the parties had not yet reached a concrete agreement.
Citing Walford v. Miles [1992] 2 A.C. 128, the court highlighted that negotiation is inherently adversarial and self-interested. An obligation to negotiate reasonably or in good faith does not provide a measurable standard for enforcement. Similarly, in Little v. Courage Ltd [1995] CLC 164, it was held that even “best endeavours” or “reasonable endeavours” to agree on a future matter are unenforceable if the core obligation remains uncertain.
2. Time Limitation
The court determined that any enforceable obligation under Clause 6.5 was limited to the period between 1 January and 1 February 2017. There was no evidence of an agreement to extend this time frame, and Moussy’s application failed to demonstrate any breach or specific conduct within this period.
Judgment
The court concluded that:
1. Clause 6.5 was not enforceable because it amounted to an agreement to agree, lacking sufficient certainty or objective criteria.
2. Any obligation under Clause 6.5 was time-limited and had long since expired.
As a result, Moussy’s application for enforcement or damages was summarily dismissed.
Implications
This case serves as a cautionary tale for parties drafting settlement agreements:
• Avoid Ambiguity: Terms like “reasonable endeavours” or “best endeavours” should be used with clear, measurable objectives and criteria for assessing compliance.
• Consider Binding Alternatives: When resolving disputes, consider using “best endeavours” clauses or directly specifying binding processes, such as arbitration or expert determination, to ensure enforceability.
• Time Limitations: Clearly define and communicate the duration of any obligations within a contract.
As the court noted, “reasonable endeavours” clauses may serve as a prompt for future cooperation but should not be relied upon to create binding legal obligations without careful drafting.
Conclusion
While “reasonable endeavours” clauses are frequently used in commercial contracts, their enforceability depends on the clarity of the obligations and the context in which they are applied. For parties negotiating settlements, ensuring precise language and measurable obligations is essential to avoid uncertainty and potential litigation.