November 2, 2016

“Best Efforts” v. “Commercially Reasonable Efforts”

This Sheppard Mullin blog looks at how courts have interpreted the distinction between “best efforts” & “commercially reasonable efforts” clauses.  Unfortunately, while deal lawyers often spill a lot of blood fighting over the precise terminology, it turns out that courts don’t necessarily look at these clauses in the same way that they do.  Here’s an excerpt:

A survey of case law in Delaware and New York—two of the most popularly contracted-for jurisdictions in M&A transactions—demonstrates that little is clear when it comes to effort clause analysis. There are not generally bright-line or uniform requirements, and when parties do not define efforts terms, there is little certainty in how courts will interpret parties’ obligations.

In the absence of contractual provisions that serve as guidelines for measuring compliance with contracted-for efforts clauses, time spent fighting over “best” v. “commercially reasonable” efforts terminology is likely time wasted.

John Jenkins