Of course, that doesn’t preclude courts from dreaming up unworkable distinctions. For example, see this November 2008 blog post about the Canadian caselaw.

Ken

But, following on those commenters who described an intent to impose a standard higher than reasonableness, do you claim it is simply unworkable to have such a higher standard, short of scheduling specific tasks that must be pursued? Isn’t a contract, at the end of the day, about allocation of risk? If all the parties are doing is requiring that each of them act in a reasonable manner, then the negotiation of risk seems rather limited.

For instance, in a provision stating that a defaulting party will use some degree of effort to cure the default before an actual ‘event of default’ occurs (presumably giving rise to a termination right), could the non-defaulting party not expect the other to do something more than act in a reasonable manner? Sure, it should not expect them to go into bankruptcy, but it could – and should – expect them to incur additional costs – perhaps more than what is reasonable – in furtherance of their contractual obligation. That is, a reasonable approach of the defaulting party may well be not to incur such costs, with the alternative being to attempt an efficient breach, or to take a calculated risk that litigation will cost it less than cure.

How would you suggest drafting this allocation of risk?

While I fully agree to with the above conclusion, I think that it ignores the fact that a party will often seek to spell things out, even though the contract is already drafted in a clear and unambiguous manner with respect to the issue at hand. To use the above example, if the other party draws comfort from the use of “commercially” on the sole basis that it gives some indication of the type of factor that will be taken into account in determining what is reasonable, I will be inclined to accept it (despite the fact that it is redundant) in the interest of getting the deal done.

While I will personally always push for drafting clarity and clear logic, the practical realities of negotiation will sometimes force me to agree to phrases which are less than ideal from a purist’s point of view. I would imagine that many of the numerous forms of “efforts” standards that we see are born out of this reality.

To do one’s utmost exhibits the same shortcoming as best efforts: lawyers would be inclined to forget that it, too, is subject to a reasonableness standard.

Ken