Greetings from South Bend, Indiana!
I’m in the middle of teaching an “intensive” three-week course on contract drafting at Notre Dame Law School. Given that we’re cramming one semester’s worth of work into the course, for me it’s living up to its name, even with a small group of students—I feel like I’ll need a vacation when I’m done. As for the students, they’re experiencing powerful g forces, going from zero to MSCD in a few days.
I can think of two reasons why I offer to teach at law school. First, I have a general sense that I should have a hand in all constituencies involved in contract drafting. And more specifically, the work involved in preparing and teaching exposes me to new ideas, as do the students.
That brings me to reason for today’s post. During a discussion of efforts provisions in today’s class, one of my students, George Lilov, mentioned that he had encountered use of the phrase business efforts in contracts.
Business efforts? So this evening I turned to the grand flea market that is the SEC’s EDGAR system, and here’s what I’ve found.
The phrase is used in employment agreements:
During his employment, Executive will perform his duties faithfully and to the best of his ability and will, except as provided below, devote his full business efforts and time to the Employer.
I leave it to others to figure out how efforts relates to time. I can’t say I’m keen on the idea.
But that use is unrelated to our friend reasonable efforts and its variants, which is what I’m interested in. Here are five examples of business efforts used in the latter context:
Owner or its designee shall use commercially reasonable business efforts to honor and to cause the successor employer to otherwise honor the tenure of Business Personnel for purposes of all benefits, including severance benefits …
… the Company shall, upon the specific request of the Executive, use its reasonable business efforts to in good faith reform such provision to comply with Code Section 409A …
… use commercially reasonable business efforts to keep available the services of the current officers and employees of the Company and its Subsidiaries; …
Both Pfenex and Dow shall use reasonable business efforts to mitigate the effects of any force majeure on their respective part.
DUOJECT shall use its best business efforts to develop the RAA in accordance with the terms and conditions of this Agreement and as more fully described and set out in Annex A, Annex B and Annex C (the “Development Work”).
This use appears in perhaps only fifty or so contracts filed on EDGAR in the past year, so it’s not prevalent. But it’s not a complete rarity either. I wouldn’t be surprised if this use of business efforts is due to cross-contamination from employment contracts.
It appears that drafters add business to efforts for the same reason that they add commercially. It follows that business is redundant for the same reason that commercially is: Whether someone complies with an efforts obligation is a function of the context. Necessarily, that involves taking into account the business circumstances, so you’re not going to assess a business context using standards from some other field.
Of course, commercially reasonable business efforts is doubly redundant.
So don’t use business efforts.
(Oh, and if you’re new to me and my writings, all efforts provisions mean the same thing. Because best efforts promises more than it can deliver, you should use only reasonable efforts. That’s the case even in those jurisdictions outside the U.S. where courts have tried, and failed, to create a distinction. See chapter 8 of MSCD.)
Addendum: For you efforts fans, here’s a bonus. I found in an underwriting agreement filed on EDGAR this week the following use of efforts:
The Company will not take, and will use its commercially best efforts to cause its Affiliates not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.
Using commercially to modify reasonable is … English. But using it to modify best? One might say, “That’s a commercially reasonable thing to do.” You’d never say, “That’s a commercially best thing to do.”
Ah, the endless variety of the contracts ecosystem. My thanks to George Lilov for fishing another wriggling specimen from the murky depths for us to marvel over. I’ll soon be writing about some other usage issues that have come to my attention while I’ve been here.