Professor Stephen Bainbridge on the Meaning of “Best Efforts” and Its Variants

After citing with approval Francis Pileggi's analysis of the Delaware Supreme Court's split decision (4-1, with CJ Strine dissenting) in The Williams Companies, Inc. v. Energy Transfer Equity, L.P. (Del. Mar. 23, 2017), Professor Bainbridge proposed the following definitions for "best efforts" and its variants:

1. "Best efforts" imposes an affirmative obligation to maximize "the contractual benefits of the person to whom the duty is owed, even if the benefits to the one owing the duty have been depleted." See In re Heard, 6 Bankr. 876, 884 (Bankr.W.D.Ky.1980). Put another way, best efforts should require "that the party put its muscles to work to perform with full energy and fairness the relevant express promises and reasonable implications therefrom." In re Cambridge Biotech Corp., 186 F.3d 1356, 1375 (Fed.Cir.1999).

2. Unless the term is given specific definition in the pertinent agreement, adding additional verbiage such as "reasonable best efforts," "commercially reasonable best efforts," and the like does not change the meaning of best efforts. Such qualifiers are mere surplusage. But see # 4 below re "commercially ...."

3. "Reasonable efforts" imposes a duty to act in good faith toward the other party. It does not require the party owing the duty to sacrifice the benefits it gains from the contract.

4. "Commercially reasonable efforts" should only be used where there is an accepted trade usage defining the scope of the effort obligation. See Jeffrey M. Dressler, Good Faith Rejection of Goods in A Falling Market, 42 Conn. L. Rev. 611, 627 (2009) (observing that "'commercially reasonable standards of fair dealing in trade" is meant to be an objective measure of conformity based on trade usage, course of dealing, and course of performance'"). 

·     If the party claiming a breach of the efforts clause is unable to prove the existence of such a trade usage, then the word "commercially" should be regarded as mere surplusage and the duty again should be one of acting in good faith.

5.  Unless the term is given specific definition in the pertinent agreement, adding or substituting other verbiage such as "good-faith reasonable efforts" or "good faith efforts" or "reasonably diligent efforts" or "diligent" efforts and the like shall be regarded as mere surplusage. The obligation remains merely one of acting in good faith.

In a previous post, Professor Bainbridge also recommended (as an "extremely helpful guide") Kenneth Adams's Understanding “Best Efforts” And Its Variants (Including Drafting Recommendations).