If you want to be depressed, I recommend you consult this article on Lexology (free registration required) by Wragge & Co., the U.K.-headquartered international law firm. It’s entitled—long-winded-title alert—Before you take the plunge. Back to basics on contracts – part 4. Best, reasonable and all reasonable endeavours – how far are you agreeing to go and what are you committed to? (Thanks for the tip, @JFBrashear. I think.)
Here’s the meat of it (bear in mind that endeavours is the UK equivalent of efforts):
What do the most common endeavours clauses require?
Best endeavours – Broadly speaking, a party is required to take all reasonable steps capable of producing the desired results in the circumstances. This is an onerous obligation. Best endeavours clauses do allow a party to have some regard for its commercial interests. They do not require action that would ruin a business, but they will still require significant expenditure on the obligor’s behalf. This includes a requirement to divert material resources from elsewhere within the business where necessary.
Reasonable endeavours – This is less stringent. While using reasonable endeavours may still involve some limited expenditure, a party is entitled to take into account its own commercial interests (e.g. its relations with third parties, its reputation and the cost of the action itself). There is some academic consensus that reasonable endeavours may only require a party to take one reasonable course of action rather than many but there is, as yet, no direct authority on the point.
All reasonable endeavours – This has been viewed as a middle ground between best and reasonable endeavours. It has been suggested that all reasonable endeavours may equate, in some respects, to best endeavours. There has been debate over whether an all reasonable endeavours obligation requires a party to sacrifice its commercial interests, but it is now largely accepted that it does not. Where there are several reasonable courses of action open to the obligor, the obligor is likely to have to pursue “all” (or at least some number) of these to fulfil its obligation.
How has English lawyers’ understanding of contract language come to this? This article advocates shades of meaning that are entirely divorced from how people speak and that are untenable as a matter of logic.
Is it the fault of the courts? Yes, in part—see this post and this post on AdamsDrafting for some zany English caselaw.
But I think it’s more a matter of the English legal profession as a whole being in thrall to magic-wordery. Lawyers and judges insist on creating bogus taxonomies that they then lamely try to rationalize, with sweeping generalizations hedged in by weasel words.
Consider the weasel words in Wragge’s article: “Broadly speaking” … “may still involve” … “some academic consensus” … “may only require” … “no direct authority” … “has been viewed” … “has been suggested” … “has been debate” … “largely accepted”. You could drive a fleet of lorries through the holes.
English judges are no better. Consider the following pronouncement in Jet2.Com Ltd v Blackpool Airport Ltd, the case discussed in Wragge’s article: “It is common ground that ‘all reasonable endeavours’ means the same as ‘best endeavours.'” “It is common ground”? Ah, that settles it! [I gather that I misunderstood the context of this statement: see my reply to SChalmers’s comment.]
The great thing about contract drafting is that you can ensure that your meaning prevails. When it comes to efforts (or endeavours), use only reasonable efforts and don’t use any efforts standard in a context where it could create confusion (that’s something I discussed in this August 2011 post).
But having to fight against institutionalized wackiness adds risk and transaction costs. That’s something anyone doing business in England, or subjecting themselves to English law, should bear in mind.
In the U.S., 94.3% of contracts professionals are under the illusion that best efforts represents a more onerous standard than reasonable efforts. But the courts, in a stunning display of rationality, have said that all efforts standards mean the same thing—reasonable efforts.
(If you want more on efforts, see MSCD chapter 7. And by searching for “best efforts” you can find other stuff on this blog and on the mothballed AdamsDrafting blog, including my post “What the Heck Does ‘Best Efforts’ Mean?”
Ken, are you really suggesting that the interpretation of these phrases by judges in the US courts is more “rational” than that in the English courts, and that consequently parties should choose US law over English law?
If so, you really are coming out fighting!
I seem to recall one of your previous arguments for settling on reasonable efforts was the varation in interpretation of best and reasonable in the 50 US State jurisdictions.
Referral to the WTO, anyone? http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm
Mark: I wouldn’t advocate steering clear of English law based on how a single usage is handled. But if treatment of endeavours is representative of how contract language generally is handled, then … .
My lodestar in determining what contract language works best is how people actually speak and write, plus basic semantics. So nothing a court can say will ever convince me that makes sense to hold that best efforts (or endeavours) imposes a more exacting obligation than does reasonable efforts.
U.S. courts have, with essentially one voice, held that all efforts standards mean the same thing. That hasn’t influenced my interpretation, but it does show that as regards this issue, U.S. courts have not followed English courts to the land of make-believe.
Meanwhile, I’ll be incommunicado for the next few hours. If I don’t reply to further comments for a while, it won’t be because I’m sulking!
Ken
Interesting. I had obtained a rather different impression of how unified the US approach was from your article ‘Understanding “Best Efforts” and its Variants (Including Drafting Recommendations)’ (Practical Lawyer, August 2004), but perhaps I didn’t understand what you were saying (and still don’t – I have it in front of me now), or perhaps things have changed in the last 7 years and now the US courts are all singing from the same hymn sheet.
When it comes to make-believe (if one accepts your premise), even if the US judges don’t believe in fairies, many US lawyers still seem to, judging by the energy put into negotiating points like putting “commercially” before “reasonable efforts”.
By the way, I share your dislike of the unrealistic attempts to shave differences between these terms. I am just very surprised to hear that US judges are such a homogenous and rational group of people, compared with judges in other jurisdictions, and that English judges are so bad that commercial parties should avoid English jurisdiction.
With apologies to the ghost of John Keats:
I saw pale judges and lawyers too,
US lawyers, death-pale were they all;
They cried—“Best efforts
Hath thee in thrall!”
I saw their starved lips in the gloam,
With horrid warning gaped wide,
Best and reasonable mean the same, they said
And I awoke and found me here,
On the cold hill’s side.
And this is why I sojourn here,
Alone and palely loitering,
Though the sedge is wither’d from the lake,
And no birds sing.
Mark: U.S. courts have consistently held that meeting an
efforts standard is a function of reasonableness, although they might use other terminology that boils down to the same thing (such as “good faith” or “diligence”).
And apart from a couple of inconsequential cases that mention the notion in passing, no case holds that best efforts serves to impose a more onerous obligation than does reasonable efforts. Not even Bloor, a New York case that is often cited by those who think that the distinction is real. (By the way, MSCD contains my most up-to-date analysis.)
As regards U.S. practitioners, I acknowledge in my post that most “are under the illusion that best efforts represents a more onerous standard than reasonable efforts.” But courts don’t play along; that’s just as well.
And as I suggest in my post, how the English legal system treats endeavours isn’t an anomaly. For example, see this December 2009 post for a discussion of an English court’s understanding of representations and warranties. I expect that at some point I’ll marshal further evidence.
You shouldn’t be surprised that English judges endorse
magic-wordery to a much greater extent than U.S. judges. Different countries can have comparable institutions, but while in one country the institution sticks to the road, the other finds itself in the ditch. That has happened endlessly through history.
Now if only I could say that in iambic pentameter …
Ken
Ken, IMHO you might be a bit harsh, and perhaps a bit hasty. First, don’t confuse Wragge’s summaries with the courts’ own pronouncements on the law. Similarly, with the ‘common ground’ comment, the common ground was only in the parties’ submissions (and, unfortunately many English lawyers wouldn’t agree with that mutual take).
As to the English profession being more prone to ‘magic wordery’, I just don’t see that this is unique to English law. English courts generally claim to be trying to give words their ordinary, in context meaning, and Mackie J is no different. If parties agree to give something their ‘best try’ in one place, and to give something else only a ‘reasonable try’, I submit it’s natural for English courts (or people) to seek a difference. If you assume parties knew they were using different expressions in two places (as the court would), it seems equally reasonable to try and distinguish a difference.
As for the US interpretation that best and reasonable mean the same thing… well, if I buy the best car and you buy only a reasonable one, then I’d _hope_ they aren’t the same (but acknowledge that they might be, speaking logically).
Scott: I stand by my comments regarding Wragge’s summary: it contains so much prevarication as to be unusable.
But I take your point regarding “common ground”; I’ll add a note to my post.
If English courts think that they’re giving ordinary meaning to words by finding a distinction between “reasonable endeavours” and “all reasonable endeavours,” they speak a kind of English that’s drastically different from any I’ve encountered.
And I wouldn’t dream of suggesting that best and reasonable mean the same thing when used on their own. My observations apply only to the idiom best efforts: if you want to determine what it means, looking at the dictionary definition of best would be exactly the wrong thing to do.
Ken
I try to avoid “best efforts” in contracts, and attempting to expand on the meaning of “reasonable efforts” and “best efforts” is a thankless task. Unfortunately for the courts, when presented with the phrases in a case, that is what they must do.
The difficulty with declaring that the phrases mean the same is that, if a layman were asked, I bet that he would almost invariably say that “best efforts” is more onerous. A court is supposed to give effect to the intention of the parties, and most parties are laymen.
Semantically, the analysis is not simple. The term “best efforts”, as commonly understood, obviously has some element of reasonableness in it, but unfortunately that does not necessarily mean that it equals “reasonable efforts”. I hope it isn’t contentious to say that using a “reasonable efforts” standard means that, if the party performs the matter with unreasonably little effort, they have breached the contract – in other words, the reasonableness is a minimum standard that the party under the obligation must meet.
“Best efforts” is harder to define, and I think means different things to different people (making it fairly unsuitable for contracts). In analysing “best efforts” so as to mean something like “all reasonable efforts”, English courts are saying that a party under a “best efforts” obligation is not required to do anything unreasonable, but must do everything else – in other words, the reasonableness is a maximum standard. This anlysis is not necessarily more “correct” than other anlyses, and is a nightmare to apply in practice. However, it is logical and, commendably, is an attempt to give effect to the words written down. It will usually, though not always, produce a different result to a “reasonable efforts” standard.
As to charges of “magic wordery”, there is certainly something in it. If “best efforts” is subjective and idiomatic, trying to give it a fixed legal meaning is invalid – this is probably why the meaning set out by the courts continues to shift from case to case. However, I don’t think this is any greater a crime than declaring “best efforts” to mean “reasonable efforts”, which is no less magic-wordery but achieves a result that seems less close to the standard meaning of the phrases.
Westmorlandia: You misunderstand my analysis. You’ll find it in MSCD chapter 7, as well as scattered throughout this blog and the AdamsDrafting blog, but the gist of it is as follows:
First, as a matter of idiom, best efforts means efforts, with best thrown in for rhetorical purposes. (It serves a similar function in other phrases, for example to the best of my knowledge.) The phrase reasonable efforts isn’t idiomatic; it’s a contract-language invention.
Second, holding that a best efforts obligation is more onerous than a reasonable efforts obligation in effect imposes on the party under the best efforts obligation a duty to behave unreasonably. As such, that interpretation is untenable.
So I can’t endorse your interpretation.
Ken
Ken, I think your point about rhetorical flourish gets to the heart of why there is passionate disagreement about this point.
(1) On the one hand, I agree wholeheartedly that it is inappropriate to try to fix different levels of effort by use of different words such as “best”, “all reasonable”, “commercially reasonable” and “reasonable” (or even, as I have seen more than once in a US contract, “commercially reasonable best efforts”). At a practical level, given the uncertainty and range of meanings of each of these terms, it is unhelpful to use hierarchies of these terms in contracts.
(1a) As my lodestar is different to yours – mine is trying make my contracts
stand up in court – I have to take account of judicial interpretation
rather than just dismiss it as perverse.
(1b) I think that relying on any of these terms carries risks of an unintended judicial interpretation. Sometimes, my client (after taking my advice) will accept these risks. Other times, my solution is to use a defined term, and in the definition to address such issues as whether the party under the obligation has to take account of the interests of the other party.
(2) On the other hand, I am not convinced that best in the phrase “best efforts” is purely rhetorical, nor that this viewpoint is so black and white that I can dismiss alternative viewpoints. I agree that one should consider how these terms are understood in general (non lawyer) usage. While some people may use best in the rhetorical sense that you describe, I think others may use the term differently, just as they may distinguish between best price and reasonable price, or best quality and reasonable quality.
(2a) My approach as a contract drafter is that, even if people do think the terms have different meanings, it is ultimately unhelpful to try to distinguish between these terms in contracts, in view of the range of meanings and the uncertainty involved.
(2b) The courts’ approach, as an interpreter of disputed contracts, at least in the UK, is to accept that people do consider the terms to have different meanings, and to interpret the meaning on the facts of the case before them.
Finally, I should mention that, until 1986, there was no reported case law in England on the meaning of reasonable endeavours. There was a fair amount of case law on the meaning of best endeavours. The practice of lawyers in negotiating different terms in contracts seems to have developed independently of any judicial authority – I ask for best, you counter with reasonable, I slice it to all reasonable.
In 1986, in UBH
(Mechanical Services) v Standard Life (which was reported only in the Times newspaper, a relatively minor source of authority) Rougier J made some comments about reasonable seeming to be a lower standard than best. These comments were cited in articles and subsequent cases.
In the last few years, the throughput of cases in the English courts on the interpretation of contracts seems to have increased substantially (or do I mean reasonably?) and at the same time, the ease of use of computers and the internet has meant that the number of reported cases has grown dramatically. As a result, we are now seeing lots of reported decisions that in a previous generation would never have seen the light of day.
I could go on, but this is turning into an article rather than a blog posting. Ken, you may be right that the courts should not try to find differences in meaning between best and reasonable, but I can certainly understand why they are doing so, when faced with counsel arguing for different meanings to support their clients’ cases.
Mark: For our respective lodestars (I’m beginning to regret having chosen that word!) to differ, you would have to be willing to employ a confusing usage because a court endorsed it. Unless I absolutely have to, I’m not willing to do that, as I’ll have available to me clearer ways to express the intended meaning.
Because as a matter of logic the suggested efforts distinction cannot work, any case that purports to offer a reasoned analysis of the distinction is doomed. Just one example is the leading Canadian case, Atmospheric Diving Systems; see this June 2010 post on the AdamsDrafting blog. If you nevertheless draft as if the distinction were real, you’re drafting on a foundation of quicksand, and you’re inflicting on readers the same confusion that results in incoherent caselaw.
I’m not swayed by the fact that most practitioners think that the distinction exists. It doesn’t. It can’t. And pretending that it can only result in confusion.
Ken
Ken, I do understand your line of reasoning – I think I just disagree on the two points you make above. In reverse order:
Firstly, I don’t think that requiring something greater than “reasonable efforts” necessarily requires something unreasonable to be done – requiring “reasonable efforts” is to require only the least effort that a reasonable person might expend. If the party can convince the court that any reasonable person might have done the same, there is no breach. However, it would not necessarily be unreasonable to do more.
Secondly, I don’t feel that “best efforts” is used idiomatically to mean the same thing as “reasonable efforts”. Short of a survey I am not sure how we would evidence this either way, but I find the idea surprising – though perhaps inevitable if anything greater than reasonable efforts were unreasonable.
W: I don’t understand your first point. Or your second point, given that reasonable efforts has no idiomatic meaning.
And by sticking to your guns, you’re guaranteeing confusion.
So I wouldn’t dream of altering my analysis; I’d happily stake my reputation on it. But I think we’ve reached the point of diminishing returns.
Ken
I think Westmorlandia’s first point is that since there are varying degrees of effort a person can make, once that effort reaches the “reasonable” threshold, it does not make it necessarily “unreasonable” to make additional effort. (I think a football coach lives by this concept.)
Agreeing with Westmorlandia, if I understand him/her correctly, the second point then follows that “best efforts” is not idiomatic because it is serves to indicate that (to use the unfortunate athletic phrase) the football player had given his 110%, rather than his 90% or whatever percentage would qualify as “reasonable”.
These examples indicate, I think, why “best efforts” is often used to indicate a degree of effort. However, to what degree it adds beyond the “reasonable” effort is almost always unclear. This is what makes it most likely qualify as unfortunate contract language and why courts seem to apply it as “reasonable efforts” which is a standard the courts are able to identify.