A friend of the blog who enjoys stirring the pot sent me a link to this newsletter produced by the law firm Mayer Brown.
When it comes to scholarship, either you’re a dwarf standing on the shoulders of giants, or you’re just a dwarf. By that standard, we got us a couple of not-on-shoulders-of-giants dwarfs in the form of the authors of the Mayer Brown piece.
Here’s the gist of it:
That said, practitioners generally understand that “best efforts” is considered the highest of these standards requiring a party to undertake every action, short of bankruptcy, to accomplish the stated objective. On the other hand, “reasonable efforts” is perceived to be a less stringent standard, allowing a party to use its discretion “within its good faith business judgment” to fulfill a particular contractual obligation. “Commercially reasonable efforts” is generally interpreted as requiring a party to undertake some conscious effort to accomplish the agreed-upon goal; however, the standard is understood to limit the amount of effort a party is required to expend.
Sheesh! Where to begin.
First, note the weasel words: “generally understand”; “is considered”; “is perceived”; “is generally interpreted”; “is understood”. I don’t give a rat’s ass what people think. I care only about what makes sense.
Second, their hierarchy might reflect some version of the conventional wisdom, but in the mountain of U.S. caselaw on efforts standards, you will find only the tiniest fragments of support for the notion that different efforts standards impose different levels of onerousness. A Manual of Style for Contract Drafting cites two cases, neither of which offers a coherent rationale. The authors of the Mayer Brown piece cite one of those cases, In re Chateaugay Corp., 198 B.R. 848, 854 (S.D.N.Y. 1996), without offering any context.
Third, the authors are evidently unaware of what etymology and semantics tell us about efforts provisions.
Fourth, the authors’ recommendations for staying out of trouble seem to miss the point of invoking a vague efforts standard in the first place. According to them, “the parties should specify the level of efforts that they expect by specifying examples of actions parties are obligated to take in order to achieve desired outcomes and outline timetables for such actions in the agreement or in development plans.” But if you can say what you want done and how soon, you wouldn’t need an efforts provision.
And fifth, you won’t find any trace of the idea that use of efforts provisions in contracts has been the subject of study. Instead, the authors simply rummaged in New York and Delaware caselaw.
It might seem futile of me to challenge this piece, but I’m not keen on having the marketplace of ideas cluttered with misinformation. For my take on efforts provisions, you can consult chapter 8 of A Manual of Style for Contract Drafting or this 2017 article.
7 thoughts on “More “Efforts” Misinformation”
Perhaps you addressed this in your treatise (I checked it out from my law school library just before graduation, and hope to soon pick one up for practice), but Chief Justice Strine seems to believe that different efforts terms do impart varying standards of onerousness. In Williams v. ETE, 159 A.3d 264, 276 (Del. 2017), CJ Strine (in dissent) remarked that ‘commercially reasonable efforts’ is “an affirmative covenant and a comparatively strong one.” For support, he cites to Kling & Nugent’s treatise, writing the following explanatory parenthetical: “observing that ‘best efforts’ standards can potentially lead to the party making the promise having to take extreme measures to fulfill it and that ‘commercially reasonable efforts’ is a strong, but slightly more limited, alternative.”
Yes, I’m aware of that; it’s an aberration. Because it has no precedential value, I don’t mention it when discussing caselaw. But I do discuss it in the fourth edition, and also at http://www.adamsdrafting.com/delaware-supreme-court-opinion-ete-williams-dispute/ and http://www.adamsdrafting.com/distinguishing-between-different-efforts-standards-makes-no-sense/.
Thanks. I look forward to reading these posts (and your work in the fourth edition) in more detail.
You say that the Mayer Brown piece doesn’t offer any context for the Chateaugay Corp. case. On page 2, the piece has a full paragraph discussing the facts and holding of the case.
I meant how that case relates to the caselaw as a whole.
Further, good drafting should consider how particular industries may have different understanding of such phrases.
Unless I misunderstand you, that doesn’t make sense. See my 2019 law-review article.