Best Efforts or Reasonable Efforts? — How Legal Efforts Standards Can Affect You

Posted by on Jun 28, 2013 in Draft Your Contract, Practice Pointers

It’s very popular for people to talk about giving “110%” these days.  Suddenly, giving 100% effort seems like slacking.  And what about just partial attempts, like 75%?  Although they are contract provisions that are often overlooked, “efforts” provisions can have a huge impact on your business deal.

Before entering into any contract, you should know what “effort” qualifiers exist and what they mean– because understanding these provisions could make the difference between having a claim under a contract or being subject to a breach of contract claim yourself.

The three most common effort qualifiers in contracts are (1) Best Efforts, (2) Reasonable Efforts and (3) Commercially Reasonable Efforts. While these may seem innocuous on the surface, each phrase can mean something totally different and can subject contracting parties to completely different standards and requirements.   While some courts remain unclear on the actual distinctions between each standard, here is a brief overview:

  1.  Best Efforts –      This is often considered the most demanding of the effort based standards.  This is a gross generalization, but think about it this way–basically if it’s possible, you have to do it, regardless of whether it’s unreasonable or not commercially reasonable or cost-effective.
  2. Reasonable Efforts      – This is a middle ground between best efforts and commercially reasonable efforts.  Again– the general practical application is that there is some leeway as to whether it’s possible vs. whether it’s reasonable.  Just because it’s possible, doesn’t necessarily mean you have to do it if it’s not reasonable.
  3. Commercially Reasonable Efforts –  This is considered the least demanding effort standard. By including a commercial standard, courts look into whether it  makes sense from a business or other economic or efficiency standard. So, just because it’s possible and just because it’s reasonable, does not mean you have to do it if it’s not necessarily reasonable for your business.

So, the next time you are reviewing a contract or signing a contract, keep an eye out for any effort based provisions and consider how they might change the deal and whether you would rather a different standard be put in place – whether a higher or lower.

To the extent possible, it is often preferable to define what standard should apply in more detail, but if one of the more generic standards is used make sure it aligns with your business goals!