Reasonable endeavours clauses – a balancing act

Introduction

On 5 March 2014, the High Court handed down a decision in the dispute between Verve Energy and Woodside Energy and a number of gas suppliers which impacts on any organisation with existing supply contracts.

It is clear that that a seller/supplier (depending on the drafting of the agreement) can take advantage of a commercial opportunity, which is in its business interests even where there is a reasonable endeavours clause. It is important both to review your existing supply contracts to identify whether there are any reasonable endeavours clauses that are subject to the business interests of the supplier / seller and also to draft clauses as clearly as possible to avoid any unintended results.