The Supposed Hierarchy of “Efforts” Clauses

Despite Yoda’s famous pronouncement in the original Star Wars movie that there was “no try,” only “do, or do not,” it is common in acquisition agreements for one or both parties to undertake to “try” to accomplish a contractual objective. The conventional contract language used to evidence an obligation to “try” to accomplish a stated object is the supposed hierarchy of “efforts” (or, in the U.K., “endeavours”) clauses. A recent Delaware Court of Chancery decision, Menn v. ConMed Corp, 2022 WL 2387802 (Del. Ch. June 30, 2022), addressed the meaning of an unusual variant of the traditional hierarchy of efforts clauses: “commercially best efforts.”

There was nothing remarkable about the ConMed decision, but it is a good reminder that the Delaware courts are not necessarily persuaded that the supposed hierarchy of efforts clauses actually exists and that all of the variants of efforts clauses appear to mean essentially the same thing. While the ConMed decision runs almost 90 pages, the juicy bit for deal practitioners is reproduced below:

Deal practitioners who draft efforts clauses “have a general sense of [the] hierarchy” of such clauses. One commonly cited version of this hierarchy places “best efforts” as the highest standard with “reasonable best efforts,” “reasonable efforts,” “commercially reasonable efforts,” and “good faith efforts” following in descending order. “Commercially best efforts” provisions are not found on the standard hierarchy. Logically, such provisions would fall between “best efforts” and “commercially reasonable efforts.”

Although deal practitioners have some sense of the hierarchy among efforts clauses, courts applying the standards have struggled to discern daylight between them. This court, for example, has interpreted “best efforts” obligations as on par with “commercially reasonable efforts.”

Because this court has consistently interpreted “best efforts” obligations as on par with “commercially reasonable efforts,” it follows that there is even less daylight between “best efforts” and “commercially best efforts” provisions. Indeed, the parties make no distinction in briefing. This decision, therefore, interprets “commercially best efforts” as imparting the same meaning as “best efforts.”

None of this should be surprising; a 2017 Weil Global Private Equity blog post reviewed both the Delaware and English approach to these clauses.[1] While England appears to recognize a hierarchy of sorts, U.S. courts seem to be less inclined.[2] The particular issue for an obligor to avoid in England appears to be the use of the word “all” as a modifier to any of the endeavour clause variants because “all reasonable endeavours” appears to have the same meaning as “best endeavours;”[3] and the distinction between “best endeavours” and “reasonable endeavours” without the “all” has been described thusly:

An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all of the reasonable ones he can.[4]

The only good news for the obligor, on both sides of the Atlantic, is that the courts seem to apply an overriding reasonableness standard regardless of the selected variant of the clause. But efforts/endeavours clauses are inherently vague, and they invite the courts to substitute their view for what the parties may have actually intended as the appropriate standard to govern a particular undertaking that is less than absolute. And regardless of the variant used, these obligations are real and can have teeth. Be aware and use with care.

Endnotes    (↵ returns to text)
  1. See Glenn West, Yoda was Wrong, at Least with Respect to Contracts—“I’ll Give it a Try” Evidences an Affirmative Commitment After All, Weil Insights, Weil’s Global Private Equity Watch, April 10, 2017, available here.
  2. See generally, Kenneth A. Adams, Interpreting and Drafting Efforts Provisions: From Unreason to Reason, 74 Bus. Law. 677 (2019).
  3. See Astor Management AG v. Atalaya Mining Plc., [2017] EWHC 425, at para. 67.
  4. Rhodia International Holdings Ltd. v. Huntsman International LLC, [2007] EWHC 293, at para. 33.