Making efforts clauses effortless
By Matthew Literovich
Legal drafting and real life often have very little in common with each other. In real life, I may tell my girlfriend I will try to pick up a can of tomato sauce at the grocery store, or tell my parents that I will try to visit them in Winnipeg for the Thanksgiving weekend, or tell my roommate that I will try to call the insurer today to inquire about our stolen bike. It is exceedingly rare, however, that the response I will get will be “but tell me how hard you are going to try”. You try to stop at the store, or visit, or make time to call the insurer. That, alone, is usually sufficient in our everyday lives.
In commercial law, however, practitioners are faced with a question that may remind at least a few of them (or maybe just me) of being a nerd in Phys. Ed. in elementary school, earnestly doing the calculation of just how much effort they need to put in to satisfy the requirements of their teacher. In Phys. Ed., we may not have had the concepts of “best efforts” or “reasonable efforts” to evaluate how hard we had to chase the soccer ball, but at law, these are just a couple of the thresholds available to us. Some of them have an almost plain English meaning to them, but others are more complex. Let’s take a look at what these effort thresholds are and how to use them in drafting.
The thing you should be doing anyway. Law would arguably be a lot simpler (and less necessary) if everyone just went about their lives being reasonable, but that doesn’t seem to be a naturally occurring state of humanity. So in the meantime, sometimes we have to be clear in our contracts that when your counterparty wants you to do something, you have to try a bit. Courts have found that this standard doesn’t mean “all efforts” but rather steps that are “logical”, “sensible” and “fair”. If it meant “all efforts”, after all, they wouldn’t just be calling it “reasonable efforts”. If you don’t try to shirk or find ways out of your responsibilities and instead follow the behavioural patterns of someone who is reasonably helpful, you’ve probably made reasonable efforts. Sadly, this ideal type of person seems to be nowhere to be found when a contractual dispute arises.
Rolling up your sleeves and making an iron-clad promise to get something done. The best man does not promise the groom that he will make “reasonable efforts” to remember the ring for the wedding. The dutiful daughter does not make “reasonable efforts” to call her parents on Christmas. The average member of society does not make “reasonable efforts” to file their taxes. Some things in life just require that extra effort, and that’s where best efforts come in. In my time in practice, I have heard best efforts described a number of ways: “leave no stone unturned” or “not stopping until you have established inevitable failure”. It can even involve paying fees or fines that you might have otherwise disputed just to make an issue go away because you have agreed to make best efforts to resolve an issue promptly. The simple answer is that best efforts is supposed to be an uncomfortable standard to navigate. It’s supposed to require an amount of effort that sets you back a little, even a fair amount. It could be argued that you agreed to do it because it was important enough to the other side that they made you commit to “best efforts”.
Commercially reasonable efforts
The one people put into contracts. What does “commercially reasonable efforts” mean? At Canadian law, it turns out the answer is “not much”. There is a case in Ontario from 1998 that suggests it may be a lower standard than reasonable efforts. Subsequent cases have watered down this distinction, to the point where it is unclear whether a distinction between “commercially reasonable efforts” and “reasonable efforts” really exists. Given that “reasonable efforts” have been considered extensively at Canadian law and “commercially reasonable efforts” have received relative scant attention, this seems to be the odd one out of a discussion on efforts standards.
Commercially reasonable best efforts
What? No! Stop!
I try to tell my clients to stick with either “reasonable efforts” or “best efforts”. They are straightforward, judicially considered, and clearly distinct from each other. Moreover, I’ve yet to come into contact with a commercial drafting situation where one of these two standards isn’t the obviously applicable one. Occasionally, clients will long for some standard between the two as a sort of “compromise” that will make everyone happy, but when we get them together with the other side and ask them to set out what they want that to mean, the inevitable conclusion seems to be that there is no easy way to define such a standard and the two contracting parties will get along just fine by choosing either “best efforts” or “reasonable efforts”. If I see “commercially reasonable efforts” in a contract I am being told to mark up, it will become “reasonable efforts”. If I see “commercially reasonable efforts” in a contract where my mandate is just to flag high level issues, the use of the term typically does not receive a flag.
More specifically, when you are picking a standard, try to be aware of not just what benefits you in the moment, but also how that will affect your negotiations with this party going forward. The last thing I want a client to experience is unnecessarily insisting that the other side use best efforts on everything under the sun, only to have that other side turn around and start insisting on my client using best efforts for all of their obligations. It’s a recipe for everyone ending up unhappy. If everyone could decide on what standards they really need on a reasonable basis, we would all be much happier. Of course, if everyone were reasonable in the first place, lawyers would be out of work and this blog post would be unnecessary, so I guess we have to work with what we have.
If you are having an issue with negotiating these types of clauses in contracts, Dentons has an experienced team that can help with that. We always try to use reasonable efforts to assist you, but we charge extra for best efforts.
Special thanks to Alexander Pease, whose initial research and presentation on this matter encouraged me to write about my own experiences with this matter.