Commercial Law – Contract Construction – ‘Reasonable’ & ‘Best’ Endeavours

The recent case of Rhodia International Holdings Limited and Rhodia UK Limited v Huntsman International LLC [2007], provides new guidance on a long-disputed area of contract law. According to the judgment of the High Court, a duty to exercise ‘reasonable endeavours’ requires less than ‘best endeavours’ but can still demand a party to act against its own commercial interests, although the case does not resolve all the uncertainty surrounding the difference between ‘reasonable’ and ‘best’ endeavours.

The case confirms that ‘reasonable endeavours’ is a less stringent obligation than ‘best endeavours’ – a concept which is commonly assumed. The case also confirms that a ‘reasonable endeavours’ obligation may be discharged by exhausting just one of a number of possible solutions, whereas a ‘best endeavours’ obligation requires all avenues to be explored.

Huntsman International LLC (“Huntsman”) had agreed to buy Rhodia International Holdings Limited and Rhodia UK Limited (“Rhodia”), a chemicals company. As part of the sale and purchase agreement both parties were to use reasonable endeavours to ensure that all supplier contracts passed from Rhodia to Huntsman, including one with a power company called Cogen.

However, Cogen refused to accept the transfer of the contract without a guarantee from Huntsman’s parent company. The argument over what was meant by reasonable endeavours focussed on Huntsman’s refusal to provide that guarantee. That refusal therefore affected the transfer of the contract with Cogen for the supply of power.

Huntsman paid for the power from the date of its purchase of Rhodia in 2001 until 2004. However, in 2004 Huntsman told Rhodia that it was pulling out of the location and that responsibility for the power contract remained with Rhodia until the contract expired in 2009. Huntsman submitted the reason for this being that the contract for the supply of power had not been transferred. Cogen claimed that £14.8m worth of power and services was owed, and the case concerned Huntsman and Rhodia arguing over who owed Cogen that amount.

The case was eventually decided on what constituted ‘reasonable endeavours’ to ensure the contract transferred from one company to the other. It was ruled that Huntsman International had breached the sale agreement by not using its reasonable endeavours to provide a guarantee for a power contract. Julian Flaux QC, sitting as a deputy High Court Judge in the case said:

“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…”

The ruling in the case made it clear that the terms of the sale contract were binding, even if its terms no longer suited one of the parties. The companies must abide by their contractual obligation to make a reasonable endeavour even if it is against their company interests.

However, there are other authorities which suggest a slightly different viewpoint. In the absence of a specific course of action assumed by a party in the context of a reasonable or best endeavours obligation, neither obligation is likely to require a party to sacrifice it own commercial interests. It appears from the other authorities – which were not discussed in this case – that ‘reasonable endeavours’ may not even require the party giving such an obligation to act to its own disadvantage. This would suggest that relatively little effort is required to comply with a ‘reasonable endeavours’ obligation.

As far as the drafting of contracts is concerned, the best way to achieve certainty would be to specify the actions a party must take in using its ‘best’ or ‘reasonable’ endeavours wherever possible. The relevant party will then be bound to take those actions in any event and the question of whether those actions are contrary to that party’s commercial interests will not arise.

© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

Where Did Our Business Laws and Regulations Come From – How Have They Changed?

The Business Laws in our nation and our regulations have become so complex they seem to be choking the viability of not only our court system, but also adding layers of laws to companies to the point of suffocation.

The bureaucracy is not only in government, but it has reached all levels of business small, medium and large. Of course, some rules of the game are needed to help our economic machine with standardization.

But, with all the case law, written laws and lawsuits, the laws no longer serve the purpose of allowing business to know in advance what to expect or give them adequate measure to dictate policies within their companies.

One thing that I have noticed is that if you pick up an old business law book prior to 1940, well, there is no much in it. It’s pretty simple and down to earth. When reading through the chapters you’ll find that it all makes sense, it’s all traceable and you can find meaning.

Today things are much different. I would advise any MBA student or individual looking to get into business law to read old business law books and text books. In fact, let me recommend a very good one to you that I have in my own personal library:

“A Text Book of Law and Business” by William H. Spencer; McGraw-Hill Book Company Incorporated; New York, NY; 1938.

If you ever find yourself asking the questions; 1.) Where Did Our Business Laws and Regulations Come From or; 2.) How Have Our Business Laws Changed Over the Years? Then just reading through this work will shed some light on the subject. So, think on it.

Becoming an English Solicitor – The Qualified Lawyers Transfer Scheme (QLTS)

English law is held in high esteem; London is among the leading legal cities in the world; and talented and qualified lawyers continue to seek to become English solicitors.

Job prospects are decent for lawyers in the UK and by becoming an English solicitor, you increase your employability. Once qualified, you will be able to practise law cross-border, finding employment in England, Europe and further afield in countries including Australia, South Africa and Russia. In addition, you broaden your professional knowledge, understanding and experience which similarly broadens your career prospects.

As a qualified English solicitor, you will be in a stronger position to offer your existing and future clients more legal services. As well as finding employment as a solicitor in England and Wales, your wider career prospects are enhanced when you gain the QLTS. You may choose to practise law in your home jurisdiction, in which case you will benefit from an improved professional track-record and marketability. Or work as an English solicitor in London. Or perhaps even find a role in an international law firm which has a base in the EU, and live and work anywhere in the world.

Whichever career path is right for you, being an English solicitor will bring you more business and greater financial rewards. And this is enhanced by the high standard of competence associated with newly qualified solicitors of England and Wales thanks to the method of assessment – whether you choose the fast-track QLTS route or the domestic route.

Under the existing Qualified Lawyers Transfer Scheme, the QLTS (previously, the Qualified Lawyers Transfer Test, the QLTT), international lawyers as well as barristers in England and Wales, are assessed to ensure they meet the necessary standards required to practise English law. Those admitted to the Roll of Solicitors of England and Wales through the QLTS have an even greater professional profile thanks to this high level of testing.

The QLTS training places international lawyers on a par with domestic lawyers, making for a more level playing field. The same standard expected of domestic lawyers is expected from overseas lawyers wanting to apply for the QLTS and lawyers who pass the QLTS have the same level of competence as lawyers qualified to practise English law through the domestic route.

Now is certainly a good time to become an English solicitor, as the financial implications of the recession start to ease and the employment markets open up once more. The QLTS offers two major improvements to candidates compared to the QLTT – there is the English language test and the removal of the experience requirement. These are both positive developments for international lawyers wanting to train as English solicitors.

As a result of these enhancements to the QLTS, more confidence is instilled in successful candidates. There is rigorous testing of all applicants’ practical skills as part of the course. This ensures no one experiences discrimination as everyone is treated the same and assessed to the same standard – although of course because the means of testing is objective, issues regarding ages and disabilities of candidates will naturally be taken into consideration. Candidates who meet the necessary standard will be admitted as a solicitor of England and Wales. Clients will therefore know that all qualified English solicitors, regardless of their route to qualification, are competent and have the professional knowledge, skills, behaviours and ethics needed to perform legal duties well.

The QLTS is an affirmative step for all international lawyers, and barristers in England and Wales, seeking to train as English solicitors. The system is fairer but equally stringent and allows only the highest calibre of lawyers to pass the QLTS assessments.

If you want to become an English solicitor, a big factor in determining whether you’ll pass your QLTS course is the course provider itself. Without excellent teaching, informative materials, a support network, and experienced staff to guide you through, passing will be more difficult. The QLTS School programme offers a dedicated approach to the QLTS assessments – and because it’s completely focused on the one test, students really benefit from an array of advice and support that is always available.

The QLTS School is committed to helping international lawyers become English solicitors. Our website has information for every stage of the process, from what you need to do to be eligible for the QLTS to applying for the course. There is advice about careers, the benefits of practising English law, and guidance for every step of the course.

With over ten years’ experience and thousands of international lawyers who have successfully qualified as English solicitors, the QLTS School has an excellent reputation and a high candidate pass rate. The QLTS course is comprehensive and convenient, and you will have all the materials you need to study – including distance learning courses, video and audio lectures, and access to the online study portal – and the freedom to study when it suits you. The study portal lets you communicate with other candidates, as well as access all the teaching tools including videos, audio and PowerPoint presentations.

Created by skilled legal professionals who have worked extensively with international lawyers and understand their needs, the QLTS School programme provides you with everything you need to pass your QLTS assessments and go on to enjoy an extensive career as an English solicitor.

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