In connection with one of my Calgary seminars, someone suggest that my treatment of best efforts doesn’t apply in Canada. I thought I should address that, because if my analysis doesn’t work for Canada, it doesn’t work anywhere.
Chapter 7 of MSCD contains my analysis of efforts provisions, and I’ve also done a good number of blog posts on the subject. The gist of my analysis is that as a matter of semantics and contract dynamics, the only sensible interpretation is that best efforts means the same thing as reasonable efforts.
As regards semantics, if I say that I’ll use best efforts to buy tickets for the opening ceremonies of the Vancouver 2010 Winter Olympics, that doesn’t mean that I’ll be selling my earthly possessions and taking out bank loans in order to buy tickets. Instead, it means that taking into account my interest in winter sports and my financial resources, I’ll give it a darn good try. But lawyers aren’t good at idiom. Instead, they break best efforts down into its constituent components, determine that best means “exceeding all others,” and conclude that best efforts requires a level of effort beyond reasonable efforts. It’s a conclusion that bears no relation to actual usage.
As regards contract dynamics, holding that best efforts requires a level of effort beyond reasonable efforts would in effect impose on a contract party under a best-efforts obligation the need to behave other than reasonably—in other words, unreasonably. And that party would be entitled to wonder exactly what level of unreasonable effort would be required to satisfy the obligation. That’s an unworkable standard.
Caselaw has no bearing on this analysis—heaven forbid that I should seek guidance from courts on how to write clearly! Instead, caselaw is only of interest for purposes of showing what sort of mischief courts can make when it comes to analyzing efforts provisions.
In that regard, it’s notable that U.S. courts have been bastions of rationality, holding in essence that all efforts provisions mean reasonable efforts. At the other extreme are English courts, whose attempts to provide an analytical framework for understanding efforts (or rather endeavours) provisions have been fatuous. (See here, here, and here.)
Given that the language of contracts in English is essentially the same the world over, this discrepancy is astonishing. It’s hard to imagine that contract parties in the U.S. and England have completely differing notions of what best effort means. Instead, the discrepancy can only be due to the fact that the legalistic analysis of best efforts is at odds with regular English usage, the result being utter confusion.
It follows that Canadian caselaw is not going to change my analysis. The only question is how sensibly Canadian courts address the issue.
The principal Canadian case on best efforts is apparently an opinion of the British Columbia Supreme Court, Atmospheric Diving Systems Inc. v. International Hard Suits Inc. (1994), 89 B.C.L.R. (2d) 356 (S.C.). Here’s what the court had to say:
In summary, the principles extracted from the cases on the issue of “best efforts” are:
- “Best efforts” imposes a higher obligation than a “reasonable effort”.
- “Best efforts” means taking, in good faith, all reasonable steps to achieve the objective, carrying the process to its logical conclusion and leaving no stone unturned.
- “Best efforts” includes doing everything known to be usual, necessary and proper for ensuring the success of the endeavour.
- The meaning of “best efforts” is, however, not boundless. It must be approached in the light of the particular contract, the parties to it and the contract’s overall purpose as reflected in its language.
- While “best efforts” of the defendant must be subject to such overriding obligations as honesty and fair dealing, it is not necessary for the plaintiff to prove that the defendant acted in bad faith.
- Evidence of “inevitable failure” is relevant to the issue of causation of damage but not to the issues of liability. The onus to show that failure was inevitable regardless of whether the defendant made “best efforts” rests on the defendant.
- Evidence that the defendant, had it acted diligently, could have satisfied the “best efforts” test is relevant evidence that the defendant did not use its best efforts.
The “no stone unturned” test has been applied to contracting relating to a wide variety of subject matter. Further, courts routinely imply a term in contracts that the parties will make reasonable efforts to fulfil their respective contractual obligations. Where the parties include a “best efforts” clause in a contract, as they did in the case at bar, they must surely intend that something more than “reasonable efforts” be used.
Note how the court says that best efforts “means taking, in good faith, all reasonable steps to achieve the objective.” So best efforts is subject to a reasonableness standard—case closed. Everything else, “no stone unturned” and all, is so much fluff, and I have nothing particular to say about it.
In MSCD I recommend that you avoid best efforts and use instead reasonable efforts. In contracts governed by Canadian law, you could instead elect to use best efforts and bank on a court’s holding that it reflects a more demanding standard than reasonable efforts. But because that distinction is unworkable and couldn’t reflect any coherent intent of the parties, I’ll continue to recommend that you use reasonable efforts, whatever jurisdiction you’re in.
By the way, given how often I come to Canada it’s been remiss of me not to have written more about the Canadian caselaw. It’s not as if I wasn’t aware of Atmospheric Diving Systems. I recall that David Scrimshaw, proprietor of an engaging blog, told me about it in this comment.
6 thoughts on ““Best Efforts” Under Canadian Law”
Ken, surely the first rule of contract construction is to give effect to the parties’ intentions as expressed by the words in the contract? I think that dismissing the word “best” – or any word – as “rhetorical emphasis” goes against this fundamental principle, and drawing analogies to common parlance doesn’t quite hold water because contracts are – necessarily and correctly – interpreted more literally. If we can’t rely on courts to give effect to the words in front of them, we may as well all go home.
I am also doubtful that agreeing a standard above “reasonable efforts” must by definition impose unreasonable burdens on a party. For example, making “reasonable efforts” to notify a third party of an event may be satisfied by posting the notification to their correct address. A reasonable person could easily settle for this. A higher standard may require them to courier the notification and follow up with a call to confirm receipt – which is clearly not unreasonable at all, but not required by a “reasonable efforts” standard.
I am not saying that the “best/reasonable/all reasonable efforts” scale is the best way of achieving these different standards – as you note, the best way of getting a party to courier a document is to just write it in the contract. But where parties have in fact agreed a “best efforts” standard on the basis that it is a higher standard than “reasonable efforts”, I think it is alarming if the courts will ignore it.
Art: The notion that best efforts imposes a stricter standard than reasonable efforts flies in the face of the way people speak English and is logically unworkable. That’s why U.S. courts have declined to apply the distinction, and why courts that have accepted it have been reduced to issuing mealy-mouthed, incoherent opinions.
And generally, courts have zero compunction about ignoring contract language if it doesn’t make sense. For example, they’ve held, unsurprisingly, that the two components of the phrase indemnify and hold harmless in effect constitute synonyms. Are you suggesting that they should instead give a different meaning to hold harmless?
Furthermore, it’s commonplace for a contract to contain three, four, or five different efforts standards. Are you suggesting that one should give each of them a distinct meaning?
Drafters incorporate in contracts all sorts of nonsense that the reasonable reader has no choice but to ignore. The ostensible distinction between best efforts and reasonable efforts falls into that category.
The thing that always gets me is that “reasonableness” is an aspect of every contract term–per many, many court cases. Therefore, any best efforts clause is going to be tempered by “reasonableness” anyway.
And, as to the example, if there’s any doubt about what one party would find “reasonable” under any particular circumstance, then it’s better to spell it out rather than rely on some vague understanding the parties may (or more likely may not have) about the type of notice. After all, what’s “best efforts” for notice in one situation (how about change of address) might not be what’s “best efforts” for notice in another (termination).
I don’t understand how the conclusion that “best efforts” requires a level of effort beyond “reasonable efforts” bears no relation to “actual usage”. The conclusion may be unworkable, ineffective, unenforceable, undemocratic, bad for the environment, etc — but that is exactly how “best efforts” is actually used. And why it makes clients and their attorneys feel better. And may even cause a party to actually exert “extra” effort. The fact that “best efforts” may not be enforceable to yield extra effort should not be lumped together with “actual usage.”
Saul: Sorry, but I believe you’re mistaken. The idiom is best efforts, whereas reasonable efforts was invented by lawyers. A reasoned distinction between the two is unworkable, and that’s why best efforts continues to spawn litigation. Ken