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.
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?”