The recent Court of Appeal decision of Electricity Corporation of New
Zealand Ltd v Fletcher Challenge Energy Ltd (CA, 10/10/2001; Richardson P,
Thomas, Keith, Blanchard and McGarth JJ, CA 132/00, 88 pp) has also given direction as to the meaning of the commonly used phrases "reasonable endeavours" or "best endeavours". This has highlighted the need for care to be taken when using these phrases, particularly in complex commercial transactions.

In the above case, the Heads of Agreement included an item headed: "Time Frame for Proceeding" which reads: "FCE/ECNZ to use all reasonable endeavours to agree a full sale and purchase agreement within three months of the date of this agreement".

The majority of the Court of Appeal, at page 35, took the view that: Where the objective and the steps needing to be taken to attain it are able to be prescribed by the Court, a best endeavours or reasonable endeavours obligation will be enforceable. That may be possible in relation to some contractual negotiations of relative simplicity and predictability. But a negotiation of complex contractual terms is such a variable matter, both in process and in result, and so dependent on the individual positions which each party may reasonably take from time to time during the bargaining, that it is impossible for a Court to define for them what they ought to have done in order to reach agreement. The Court neither knows the result nor is able to say how each offer should have been made, nor whether it should have been accepted.

Therefore there appears to be three types of situations: