In stating deadlines, one can use a vague standard backed up by a precise standard:
Acme shall promptly, and in any event no later than 30 days after it learns of that breach, notify Widgetco of …
Well, thanks to a tip from a participant at a recent in-house “Drafting Clearer Contracts” seminar I did in Palo Alto, I learned that some drafters think you can do something comparable with efforts provisions. Behold the following, which washed up dead on the shores of Lake EDGAR (emphasis added):
Without limiting or affecting the restrictions and obligations of Section 2 above, each party agrees that it will undertake best efforts, and in no event less than reasonable efforts, to ensure that the confidentiality of the other party’s Confidential Information will be maintained …
To which I say, What the freak!
Imposing two vague standards makes no sense. Perhaps drafters think that best efforts means you have to go full throttle, all the time, even if you don’t need to, so adding a reference to reasonable efforts is necessary to allow the party in question to ease up whenever greater exertions aren’t necessary. That’s nonsense: efforts provisions require that the party in question do what’s reasonable in the circumstances, whatever that might be.
This is just another example of drafters thinking they’re pulling some sort of neat ninja drafting trick but are instead advertising to the world that they don’t know what’s going on.
And remember, kids, use only reasonable efforts. If you want to know why, search for efforts on this blog.
And now, some free extras. First, two tweets prompted by my searching on EDGAR for contracts that use best efforts and reasonable efforts in close proximity:
"5.1 BEST EFFORTS. The Company shall use all commercially reasonable efforts to …" 0_o
— Ken Adams (@AdamsDrafting) October 19, 2015
"Guarantors shall use reasonable best efforts to file, and shall use commercially reasonable efforts to have become effective …" 0_o
— Ken Adams (@AdamsDrafting) October 19, 2015
And here’s a tweet by @CherylStephens:
@KonciseD I was hoping to never have to think of this again. Check this: http://t.co/XFwQQSovgf
— CherylStephens.com (@CherylStephens) October 19, 2015
It serves as a reminder that many Canadian and English law firms don’t focus on how to handle efforts in a way that avoids confusion. Instead, they perpetuate, even embellish, misbegotten distinctions. For purposes of Canadian law, the most immediate antidote to that is this article. For purposes of English law, check out this article.
3 thoughts on “More “Efforts” Weirdness”
I haven’t done my homework, but is the word ‘commercially’ an unnecessary addition to ‘reasonable’? If not, what’s the difference between ‘reasonable’ and ‘commercially reasonable’? Which standard is higher? In what real-life situations would the two terms produce different results?
Do your MSCD homework! :-)
MSCD3 chapter 8 on ‘efforts’, taken as a whole, seems to say they mean the same thing. I couldn’t find a sentence that nailed it, though.
In an impressive 2004 article by one Kenneth A. Adams appears the following:
‘Commercially reasonable efforts should mean
the same thing as reasonable efforts and, by extension, best efforts and reasonable best efforts: A
reasonableness standard applied to a commercial
dispute would necessarily incorporate commercial
notions of reasonableness. (There is no
case law on point.)’
That passage seems to say that ‘reasonable’ and ‘commercially reasonable’ mean the same thing and would never produce different results, but then it takes a U-turn and implicitly distinguishes ‘commercial notions of reasonableness’ from ‘non-commercial notions of reasonableness’, which would impliedly produce different results, else why distinguish them? I hear the sound of the can being kicked down the road.
On reflection, I think the part before the U-turn is the better part. ‘Plain’ reasonableness incorporates the idea of ‘under the conditions then and there existing’, so in a commercial dispute, ‘plain’ reasonableness would require taking into account that the dispute took place not just in commerce, but in a particular line of business.
The drafting takeaway might be this:
If you’re a ‘minimalist’ (my name for drafters who say ‘omit needless words, they’re just hooks for trouble’), say ‘reasonable’ and be done with it.
If you’re a ‘maximalist’ (my name for drafters who say ‘even suspenders and a belt may not be enough under combat conditions!’) say ‘commercially reasonable under conditions existing in the Widget industry at the time of the action or inaction under scrutiny’.