“Extraordinary Efforts”

The other day I permitted myself the following japery on Twitter:

But that led me to search for efforts standards on steroids. Searches for the likes of major efforts uncovered nothing, unsurprisingly, but I got plenty of hits on EDGAR for one formulation—extraordinary efforts.

Most of the hits used the phrase to state what a party doesn’t have to do:

During such ninety (90) day period, (i) Buyer shall not be obligated to use any extraordinary efforts to assist in the collection of the Excluded Receivables but shall handle the collection of such Excluded Receivables in a manner that is consistent with the way in which Buyer handles the collection of its own accounts receivable …

It is the intent of the Parties that reasonable, but not extraordinary, efforts be used to locate Class Members.

Franchisee shall provide information (to the extent in Franchisee’s possession or under Franchisee’s control or otherwise available to Franchisee without material expense or extraordinary efforts) as NetSpend or the Issuing Bank may require from time to time to permit NetSpend or the Issuing Bank to satisfy applicable obligations under laws, including, without limitation, the OFAC Rules and/or anti-money laundering laws.

Notwithstanding anything contained in this Section 5.5, in no event shall Tenant be obligated to employ extraordinary efforts or incur extraordinary expenses (e.g., overtime), to overcome any Landlord Delays.

… and there is no Material Contract in respect of which it would be necessary to make extraordinary efforts or expenditures so that such Material Contract could be performed in accordance with its terms without rendering Minera party thereto liable to civil, criminal or administrative proceedings; …

The phrase is also used in connection with employee performance:

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its shareholders to grant the Restricted Stock described in this Agreement to the Grantee as an inducement to enter into or remain in the service of the Company and as an incentive for extraordinary efforts during such service: …

No bonus will be payable for this Transaction unless the net cash consideration to the Company under the currently contemplated transaction that involves a sale to the buyer of the Company’s JV interest in the Norman and Louisville properties and a transfer to the Company of the buyer’s interest in the Company’s Fayetteville, Indiana and Greensboro properties is an amount at which the CEO determines to constitute extraordinary efforts by Employee.

It’s not a good idea to use extraordinary efforts to state a limit on what kind of efforts are required of a contract party. It’s safe to assume that a court would conclude that extraordinary efforts is a more exacting standard than is reasonable efforts. It follows that a disgruntled contract party might argue, and a court might conclude, that even if under the contract you’re not required to use extraordinary efforts in a given context, that still leaves room for you to do more than use just reasonable efforts. That way lies confusion.

So I recommend that instead of saying that a contract party doesn’t have to use extraordinary efforts, you say that they don’t have to use more than reasonable efforts. Using the first example quoted above, here’s how that would work:

During such ninety (90) day period, (i) Buyer shall not be obligated to use any extraordinary efforts more than reasonable efforts to assist in the collection of the Excluded Receivables but shall handle the collection of such Excluded Receivables in a manner that is consistent with the way in which Buyer handles the collection of its own accounts receivable …

Mind you, why not instead make the obligation in question subject to a reasonable efforts standard? That would seem more economical.

As for using extraordinary efforts for employee conduct, the first example quoted above is benign, because if refers to action taken to offer an incentive for extraordinary efforts by an employee—there’s no scope for a fight over exactly what kind of efforts were envisaged.

But if a contract refers to an employee’s being rewarded for extraordinary efforts after the fact, you should make sure that whether that employee used extraordinary efforts is determined by someone. Otherwise, you risk getting into a messy fight over whether, considered objectively, the conduct in question was extraordinary. The problem isn’t simply that extraordinary efforts is vague; it’s that it’s not clear how much more than reasonable conduct has to be for it to be considered extraordinary.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.