Case: Terrell v Mabie Todd &amp; Co Ltd (1952) 69 RPC 234
Outcome: cited
aspects of cl 6.2 should be emphasised at the outset. The first is that cl 6.2 imposed reciprocal and, at least in the case of parallel importation, potentially interdependent obligations on AMC and Hamilton. Those obligations could operate upon the same subject matter for the reason that each could relate, as in the present case, to genuine Hamilton products finding their way into the Hong Kong market outside of the Distribution Agreement. Further, when considered together with cl 34, one party's best efforts obligation could require it to do everything reasonable to help the other carry out its best efforts obligation. Secondly , the subclause did not impose a duty on either party to achieve a specific result, rather it was to use best efforts to secure that result: on the difference see Unidroit Principles of International Commercial Contracts : 2004, Art 5.1.4, Comment 1. The content of "best efforts" is considered below. Thirdly , the best efforts obligation was directed at preventing the occurrence of an undesired event, ie the sale "in the Territory" by third parties of products the subject of the Distribution Agreement. In this it was a less common form of the obligation, the more usual form being directed at procuring the occurrence of a desired result, eg the sale or promotion of a product: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41 at 63-64; the exploitation of an invention: Terrell v Mabie Todd &amp; Co Ltd (1952) 69 RPC 234 ; or the advancement of a business: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452. The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , &#167;7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting