Drafting Best Efforts, Good Faith, and Fair Dealing Clauses in Commercial Contracts

Parties to commercial contracts frequently negotiate clauses in the agreements requiring one or both parties to use their "best efforts" to perform their obligations under the contract. In some states, "reasonable efforts" or "commercially reasonable efforts" provisions are instead used to convey the parties' expected performance under a commercial contract.

When disputes over contract performance arise, interpreting efforts clauses often presents challenges for the parties, their counsel, and the courts. Because drafting counsel have often failed to define the actions that constitute "best efforts" clearly, courts have had a difficult time interpreting efforts clauses. In the absence of express language, courts will often rely on the implied covenant of good faith and fair dealing to determine the acceptable standard of performance.

To avoid enforceability pitfalls, expensive litigation, or protracted settlement negotiations, counsel for contracting parties should consider including a clear set of guidelines for measuring the performance of efforts provisions in commercial contracts.

Listen as our experienced panel examines how some courts have ruled in contract disputes centered around best efforts, reasonable efforts, and commercially reasonable efforts clauses. The panel will discuss best practices for drafting precise and predictable efforts provisions in commercial contracts that adequately reflect the parties' expectations.