| The recent case of Rhodia International Holdings | | | | contract transferred from one company to the |
| Limited and Rhodia UK Limited v Huntsman | | | | other. It was ruled that Huntsman International |
| International LLC [2007], provides new guidance | | | | had breached the sale agreement by not using its |
| on a long-disputed area of contract law. According | | | | reasonable endeavours to provide a guarantee for |
| to the judgment of the High Court, a duty to | | | | a power contract. Julian Flaux QC, sitting as a |
| exercise 'reasonable endeavours' requires less | | | | deputy High Court Judge in the case said: |
| than 'best endeavours' but can still demand a | | | | "An obligation to use reasonable endeavours to |
| party to act against its own commercial interests, | | | | achieve the aim probably only requires a party to |
| although the case does not resolve all the | | | | take one reasonable course, not all of them, |
| uncertainty surrounding the difference between | | | | whereas an obligation to use best endeavours |
| 'reasonable' and 'best' endeavours. | | | | probably requires a party to take all the |
| The case confirms that 'reasonable endeavours' is | | | | reasonable courses he can. In that context, it |
| a less stringent obligation than 'best endeavours' - | | | | may well be that an obligation to use all |
| a concept which is commonly assumed. The case | | | | reasonable endeavours equates with using best |
| also confirms that a 'reasonable endeavours' | | | | endeavours..." |
| obligation may be discharged by exhausting just | | | | The ruling in the case made it clear that the |
| one of a number of possible solutions, whereas a | | | | terms of the sale contract were binding, even if |
| 'best endeavours' obligation requires all avenues to | | | | its terms no longer suited one of the parties. The |
| be explored. | | | | companies must abide by their contractual |
| Huntsman International LLC ("Huntsman") had | | | | obligation to make a reasonable endeavour even if |
| agreed to buy Rhodia International Holdings | | | | it is against their company interests. |
| Limited and Rhodia UK Limited ("Rhodia"), a | | | | However, there are other authorities which |
| chemicals company. As part of the sale and | | | | suggest a slightly different viewpoint. In the |
| purchase agreement both parties were to use | | | | absence of a specific course of action assumed |
| reasonable endeavours to ensure that all supplier | | | | by a party in the context of a reasonable or best |
| contracts passed from Rhodia to Huntsman, | | | | endeavours obligation, neither obligation is likely to |
| including one with a power company called Cogen. | | | | require a party to sacrifice it own commercial |
| However, Cogen refused to accept the transfer | | | | interests. It appears from the other authorities - |
| of the contract without a guarantee from | | | | which were not discussed in this case - that |
| Huntsman's parent company. The argument over | | | | 'reasonable endeavours' may not even require the |
| what was meant by reasonable endeavours | | | | party giving such an obligation to act to its own |
| focussed on Huntsman's refusal to provide that | | | | disadvantage. This would suggest that relatively |
| guarantee. That refusal therefore affected the | | | | little effort is required to comply with a |
| transfer of the contract with Cogen for the | | | | 'reasonable endeavours' obligation. |
| supply of power. | | | | As far as the drafting of contracts is concerned, |
| Huntsman paid for the power from the date of | | | | the best way to achieve certainty would be to |
| its purchase of Rhodia in 2001 until 2004. | | | | specify the actions a party must take in using its |
| However, in 2004 Huntsman told Rhodia that it | | | | 'best' or 'reasonable' endeavours wherever |
| was pulling out of the location and that | | | | possible. The relevant party will then be bound to |
| responsibility for the power contract remained | | | | take those actions in any event and the question |
| with Rhodia until the contract expired in 2009. | | | | of whether those actions are contrary to that |
| Huntsman submitted the reason for this being | | | | party's commercial interests will not arise. |
| that the contract for the supply of power had | | | | © RT COOPERS, 2007. This Briefing Note |
| not been transferred. Cogen claimed that | | | | does not provide a comprehensive or complete |
| £14.8m worth of power and services was | | | | statement of the law relating to the issues |
| owed, and the case concerned Huntsman and | | | | discussed nor does it constitute legal advice. It is |
| Rhodia arguing over who owed Cogen that | | | | intended only to highlight general issues. Specialist |
| amount. | | | | legal advice should always be sought in relation to |
| The case was eventually decided on what | | | | particular circumstances. |
| constituted 'reasonable endeavours' to ensure the | | | | |