“Efforts” Contract Clauses

“Efforts” provisions are found in many contracts. There are many variations on them and quite a bit of confusion about what the variations mean.

• Variations include:

o Best efforts;

o Commercially reasonable efforts;

o Reasonable best efforts;

o Reasonable effort;

o Goodfaith efforts;

o Commercially reasonable best efforts;

o Diligent efforts;

o Goodfaith best efforts;

o Every effort; and

o Commercially reasonable and diligent efforts.

• Many attorneys believe the variants have significantly different meanings and impose different levels of obligation. A closer study of case law shows that unless the terms are defined, they end up generally meaning essentially the same thing.

• To actually have the provisions means something specific, the contract should create one or more benchmarks for what level of effort is sufficient. Those may include:

o Promises made during contract negotiation;

o Industry practice;

o Practice with respect to other contracts; and

o How the promisor would have acted if the promisor and promisee had been in the same entity.

• In defining the efforts provision, avoid using the common variants. Define the efforts with respect to a given goal. For instance, the efforts a reasonable person in the position of the promisor would make so as to achieve that goal as expeditiously as possible. This can be further refined with references to the specific industry, and carveouts.