Someone steered me to this post on the California Corporate & Securities Law blog. It’s about a recent California case on the meaning of best efforts. The court held—shock horror probe!—that best efforts is subject to a reasonableness standard, leading my informant to suggest that the court agrees with my views on this subject.
I’m delighted to receive tips of this sort—keep them coming! But this case prompted two thoughts:
First, this case is nothing new, as U.S. courts have essentially said, with one voice, that all efforts provisions mean reasonable efforts.
Second, and more to the point, what a given court has to say on the subject is largely irrelevant for my purposes. Indeed, it’s not a matter of whether a court agrees with me or not.
Instead, a drafter’s function is very different from that of a court. Courts are in the mucky business of determining the meaning of unclear contract language. By contrast, a drafter aims to articulate clearly the meaning of the parties, without creating confusion that a court has to resolve.
So the analysis that a court engages in when considering what best efforts means is of little interest to me. What matters most is that using the phrase best efforts is to invite confusion—for reasons I’ve explained elsewhere, any attempt to distinguish best efforts (and other efforts variants) from reasonable efforts is doomed.
When asked to determine what best efforts means, a court will either be sensible about it or will screw it up. The California case that prompted this post is an example of sensible analysis; I’ve written about English cases (here and here) and a Canadian case (here) that offer scarily flawed analysis.
But in considering such cases, I’m a spectator, in the cheap seats eating popcorn. That’s because the only efforts phrase I use is reasonable efforts, which doesn’t create confusion.
Ken, you write: “…
a drafter aims to articulate clearly the meaning of the parties, without creating confusion that a court has to resolve.”
Isn’t it part of a drafter’s job to take into account what courts have already had to say about the language the drafter contemplates using?
How can any competent drafter take the position you espouse, i.e., that “what a given court has to say on the subject is largely irrelevant”?
We’ve had this discussion before, so if you prefer not to approve my comment for posting, that’s fine; I’ll post it on my own blog.
You’re missing the point. Because best efforts will always create confusion, I don’t use it. It follows that what a court has to say about best efforts is irrelevant for my purposes.
If a court were to conclude that reasonable efforts means something other than reasonable efforts, then I’d be concerned.
Ken
Ken, if your point is that using “best efforts” is a bad idea, I agree completely — but it would be well for you to emphasize it more. I had to go back and read between the lines to figure out that that’s what you might have had in mind.
I fear you may be missing a point yourself, which is that sometimes drafters don’t get to decide what language they use in a contract.
Like most drafters, I’ve been in situations where the client’s business people have said, in effect: Yes, we get it, there are legal risks in using Clause X. But the other side insists on including it. It’s not worth risking losing the deal over. So [screw] it, just put in Clause X and we’ll take our chances.
In that type of situation, the drafter has little choice but to salute smartly and say aye aye, sir. Clearly the drafter then has to try to take into account what the courts have previously held about the language. It would be helpful if you could offer suggestions to help the drafter try to “write around” those holdings as best s/he can — perhaps by a carefully-crafted definition of best efforts.