Jet2.com Limited v Blackpool Airport Limited

 

The Message

An obligation to use best or reasonable endeavours may have onerous consequences if it is enforceable.

The Case

The Court of Appeal has considered whether an obligation to use best endeavours can require a party to act against its own commercial interests In 2005, Jet2 entered into a 15 year Agreement with Blackpool Airport whereby Jet2 would operate low-costs flights to and from Belfast from the Airport. The Agreement involved substantial investment by Jet2 and, in addition to providing all the ground and other services required, the Airport agreed to use its best endeavours to promote Jet2’s low cost services from the Airport.

Somewhat extraordinarily, the Agreement made no express provision as to what the operating hours of the Airport were to be in relation to Jet2’s flights. The normal opening hours were 7 a.m. to 9 p.m. but, as is the practice with low-cost operators , many of Jet2’s flights are outside the normal hours.

No issue arose in this respect for over 4 years despite the fact that keeping the Airport open after normal hours involved substantial additional costs. However, the Airport has never made a profit and, by 2010, the Airport was so concerned about the additional costs it was incurring that they told Jet2 they would no longer accept departures or arrivals outside normal operating hours.

Jet2 brought proceedings claiming that the Airport was in breach of the best endeavours obligation to promote its services and it obtained an injunction to allow flights to continue outside normal hours pending the outcome of their claim. The Airport claimed that the best endeavours obligation was too vague and unclear to be enforceable and that it could not in any event require it to act contrary to its own interests.

The Court accepted that best endeavours obligations can be too unclear to be enforceable when they are general in terms and provide no criteria to assess what is required to be done and whether there has been a breach or not. However, the Court thought there was an important distinction between a clause whose content is so uncertain to be enforceable and a clause which does give rise to a clear blinding obligation but where the precise limits of that obligation are unclear.

The Court held that an obligation to promote another party’s business was not too uncertain to be enforceable although there could well be arguments as to what actually had to be done to comply with it. It was obvious that a low-cost airline would need to operate outside normal hours and the Court construed as requiring the Airport to do all it reasonably could to enable Jet2’s business from the Airport to succeed and grow.

The Court accepted that it is relevant to consider the Airport’s own financial interests in determining the extent of its obligations but, in the context of the Agreement entered into, it held that the Airport could not refuse to continue operating outside normal hours just because this caused it a loss. Given that the ability of Jet2 to successfully operate its business depended so heavily on scheduling aircraft movements outside normal hours, the Airport could not restrict such movements just because they were causing it substantial losses.

Given that there had been no issue as to flights being outside normal hours for over 4 years prior to the dispute, the Court thought the onus was on the Airport to justify any change in operating hours and that it could not do so. However, the Court accepted that circumstances could change so that the extent of the Airport’s obligations to keep the Airport open may lessen if, for example, Jet2 reduced its reliance on out of hours flights.

The Court was not unanimous in its decision. One of the 3 Judges did consider that the wording was too imprecise as a best endeavours clause needed to sufficiently define the steps required and he did not think the parties had agreed to the Airport having to make such a positive commitment over such a long period. He considered that, if there was to be an obligation for the Airport to operate outside normal hours, this would have to have been spelled out rather than covered by the best endeavours clause.