The Court of Appeal has clarified the use of the terms 'all reasonable endeavours' and 'good faith' in this tasty case, which has crossed the goal line for lawyers and people interested in the interpretation of these key phrases in contracts.
Sainsbury's and Bristol Rovers entered into a contract for Sainsbury's to buy a football stadium from Bristol Rovers. The purchase contract was subject to a number of conditions. If the conditions were not satisfied, either party could terminate the contract.
One of the conditions was that Sainsbury's would obtain acceptable planning permission to build a store on the site of the stadium with no restriction on delivery hours. Sainsbury's was to use 'all reasonable endeavours' to obtain the planning permission, and act in good faith in respect of its obligations in the contract and assisting the other party to get planning permission. The contract said Sainsbury's could use its discretion in pursuing an appeal against a planning refusal but it had to appeal if counsel put the chance of success at 60% or more.
Planning permission was actually granted, but it included a restriction on delivery hours, which was not acceptable to Sainsbury's. On advice that the chance of an appeal of the planning permission restriction being removed was less than 60%, Sainsbury's withdrew its appeal and tried to terminate the contract with Bristol Rovers. Bristol Rovers argued that Sainsbury's had failed to use all reasonable endeavours in the planning permission and that refusing to allow an appeal of the decision was a breach of good faith.
The Court of Appeal agreed with the previous decision of the High Court, which was that Sainsbury's was entitled to terminate the contract. The Court confirmed that Sainsbury's refusal to consent to allow Bristol Rovers to make a planning application of its own was not a breach of good faith or a requirement under the obligation to use all reasonable endeavours.
The duty of good faith was in relation to the respective contractual obligations of each party and did not require Sainsbury's to adhere more widely to the spirit of the agreement. The obligation was on Sainsbury's to get the planning and it had performed according to the agreement.
If there was no obligation to achieve a certain result (such as to allow Bristol Rovers to make an application), there was no failure to act in good faith when the party failed to achieve a desired (but not contractually required) result.
This case highlights the danger of parties qualifying obligations in a contract with the use of 'endeavours' and 'good faith'. If a party to a contract wants something specific to be done, it must be drafted in to the contract as a straight obligation.
This case highlights the reluctance of the courts to expand the meaning of 'good faith' beyond what is set out in black and white in the contract. The lesson is therefore simple - if you want something done, express it clearly as an absolute obligation in the contract and don’t be shy about it.