Flying into trouble
09 August 2011
A contract often contains a degree of flexibility about whether one of its terms must be complied with. Blackpool Airport Limited (BAL) recently found out that such clauses don`t necessarily give as much wriggle room as might be thought. BAL agreed with low cost airline Jet2.com to "co-operate together and use their best endeavours to promote Jet2.com`s low cost services from [Blackpool Airport]" and to "use all reasonable endeavours to provide a low cost base to facilitate Jet2.com`s low-cost pricing". The parties` obligations governing their 15 year agreement were set out in a short letter drafted, according to the court, "with little legal assistance".
For four years BAL allowed Jet2 to operate outside its published hours, even though it was under no express obligation in its agreement with Jet2 to do so. BAL knew that Jet2 needed some flexibility in order to operate as a low cost airline. However, keeping the airport open just for Jet2 proved to be loss making for BAL. When new owners took over BAL, they decided to limit Jet2 to the published opening hours. They gave Jet2 only a week to alter its schedules.
Much expensive litigation followed. The court held that there was an implied contractual term that Jet2 would be allowed to operate outside published hours. BAL argued that its duties to use best or all reasonable endeavours did not require it to act against its own commercial interests (ie to operate the agreement at a loss). The judge disagreed. The duty to use best or all reasonable endeavours (which everyone agreed had the same meaning) could not be unilaterally dumped as soon as it no longer suited one party to the contract. The duty related to something that was in BAL`s direct control (keeping open the airport) and it hadn`t put anything else in the agreement to limit its duty.
Although strictly speaking Jet2 "won" the litigation, the court didn`t say what should happen next. BAL had some duty to allow services outside its published hours but the court didn`t rule on for how long or how frequently BAL was obliged to offer the extended hours over the next 10 years of the agreement. These problems could have been avoided by a properly drafted contract at the outset.
Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.
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