Contract Concepts: “Efforts” Provisions—They’re Not What You (Probably) Think
[Are you one of the 46 people who haven’t had Ken Adams gently take you by the upper arm and explain, in low but urgent tones, the problem with efforts provisions in contracts? Well then, you’re in luck! (This piece was first published on the website of LegalSifter partner American Inns of Court.)]
When challenged over a traditional but dysfunctional word or phrase used in contracts, traditionalists are prone to invoking two bogus lines of defense.
One is to blurt out that “everyone” knows that the traditional usage is the way to go. That requires relying on a logical fallacy. (For more about that, see this 2020 blog post.)
Another is to say that the traditional usage has been “tested” by the courts—that caselaw has established a meaning for that usage. That suffers from three fatal weaknesses. (For more about that, see this 2017 blog post.)
This is where efforts provisions come in.
An efforts provision uses the word efforts (or some variant) to say that the party in question must try hard to accomplish a particular goal—for example, Acme shall use reasonable efforts to obtain the Permits. That’s in contrast to provisions that impose a “flat” obligation—for example, Acme shall pay each invoice no later than 30 days after the date of the invoice.
Efforts provisions show us that of the last-ditch lines of defense of contract-drafting traditionalists, the everyone-knows-it rationalization is the more powerful.
In the United States, caselaw overwhelmingly supports the notion that all efforts provisions mean the same thing—you’re required to do what’s reasonable in the circumstances. But most people who work with contracts are in thrall to the notion that different efforts provisions (best efforts, reasonable efforts, commercially reasonable efforts, all reasonable efforts, and so on) involve different levels of onerousness, resulting in a hierarchy of efforts provisions.
The odds are that you, dear reader, share that view. I’m here to tell you it makes no sense.
The notion that, say, a provision using best efforts requires that a party exert itself more than would a provision using reasonable efforts requires buying into the legalistic notion that different words always express different meanings. In this case, that notion encounters three insurmountable obstacles.
First, the notion of trying hard is subject to a reasonableness standard.
Second, if you tell me it might not be enough for me to act reasonably to comply with a best efforts obligation, you’re in effect saying I might have to act unreasonably. As a matter of contract logic, that doesn’t work.
And third, the evidence shows that in this and other contexts, the word best has been “delexicalized”—it’s used not to express its dictionary definition but instead it’s used as a rhetorical flourish—to say “I care” or “this is a formal context.” Another example is it’s in your best interest as compared with it’s in your interest.
Perhaps the clearest evidence for the third point is that the data shows that the phrase reasonable efforts (and in England, reasonable endeavours) is not standard English. Instead, the alternatives featuring best are used much more frequently. They’re idiomatic, whereas the versions using reasonable are the result of legalistic hairsplitting.
All this is detailed at length in my 2019 law review article on the subject, here. And it so happens I’m right. That’s why in a 2020 opinion, the Delaware Chancery Court—the most influential business-law court in the land—said my article is “The most thorough analytical treatment of efforts clauses” and called me “The leading commentator on efforts clauses.” (See this blog post.)
Once I collected the evidence, it was easy for me to make a solid case. What many people find hard is breaking one of the legal profession’s ingrained bad habits. I encourage you to join me in ditching the notion of a hierarchy of efforts provisions. The solution is straightforward—if you have to use efforts at all, use only reasonable efforts.