Not enough people write about contract usages, so I’m pleased when a new article arrives on the scene, particularly when it’s written by someone other than me. But one sign of a mature marketplace of ideas is when commentators build on the work of others, instead of treating a given topic as if they’re the first to examine it.
With that in mind, I permit myself to comment on a new article in the New York Law Journal, “Best Efforts”, “Commercially Reasonable” and Other Terms No One Understands (PDF here). It’s by Grant Esposito and Jessica Kaufman, litigators at Morrison Foerster.
Here’s what I like most about the article: It points out that using efforts provisions can be a matter of expediency, when the parties don’t want to spend time negotiating precise guidelines, or the parties decide that it would be too contentious to do so. And the article offers useful examples of how inconsistent the caselaw can be.
Here’s what I think was missing:
First, its description of the function of efforts provisions is incomplete. No matter how much time and goodwill the parties are willing to invest, there will always be a place for efforts provisions. When a party doesn’t have complete control over the outcome—as is the case when, for example, Acme is applying for government permits—it doesn’t make sense to apply a flat obligation (Acme shall obtain the Permits). Instead, it makes sense to use an efforts standard (Acme shall use reasonable efforts to obtain the Permits).
Second, the article offers no discussion of the broader semantics. For example, it suggests that commercially reasonable efforts and best efforts are inherently different standards. Instead, commercially reasonable efforts and best efforts are just two of a constellation of efforts standards. Besides the potential for dispute that’s inherent in vagueness, the core problem with efforts standards is that people are inclined to see a spectrum of onerousness. As a matter of semantics and contract law, that doesn’t work. (See for example my article discussing the English caselaw, here.) The crucial piece of advice when it comes to efforts—advice missing from the article—is that you should use only reasonable efforts.
And third, it would have been helpful to have drafting guidance that is more specific. Yes, you can eliminate efforts standards by using precise guidelines, but what if you elect to use reasonable efforts? That’s something I tackle in MSCD‘s discussion of how you define efforts, but I expect to get into more detail for the fourth edition. For example, it might be a good idea to make it clear that an efforts standard is to be gauged by measuring activities undertaken against, say, industry standards, as opposed to measuring how much of a burden those activities place on the party under the efforts obligation. More about that soon.
Bottom line: I learned something from Grant and Jessica’s article, and it reminded me that I have further work to do. So here’s to the marketplace of ideas!