A best efforts clause is a contract provision requiring one party to pursue a specified goal with the highest degree of diligence the circumstances allow, even when the outcome isn’t guaranteed. It shifts the legal question from whether the party succeeded to how hard the party tried. What that actually demands, though, depends heavily on which court is reading the clause and how carefully it was drafted.
What the Standard Demands
Best efforts sits at the top of the efforts hierarchy in contract law. It asks for more than “reasonable efforts,” which calls for sensible steps, and more than “commercially reasonable efforts,” which measures conduct against industry norms. A party bound by a best efforts clause is expected to exhaust available avenues, not just pursue the obvious ones.
The clause acknowledges that success depends on variables nobody fully controls: market conditions, regulatory approvals, third-party cooperation. So instead of promising a result, the party promises effort of a particular quality. Courts then evaluate that effort after the fact, which is where things get complicated.
How Courts Interpret Best Efforts
There is no single national definition. Courts have landed on at least four distinct approaches, and the one your jurisdiction follows can dramatically change what the clause requires.
- The Bloor standard. The most influential test comes from Bloor v. Falstaff Brewing Corp., which held that best efforts requires a party to act “in good faith and to the extent of its own total capabilities,” measured against the conduct of an “average, prudent, comparable” business in the same position. This dual test looks at both what the specific party could do and what a typical company in its shoes would do. Many federal courts follow some version of it.
- Good faith equivalence. A minority of courts treat best efforts as essentially identical to the implied duty of good faith and fair dealing. Under this reading, a party satisfies its obligation as long as it acts honestly and doesn’t undermine the other side’s ability to benefit from the deal. This reading strips the clause of any additional force beyond what the law already implies in every contract.
- Purely subjective approach. Some courts focus entirely on the specific party’s circumstances, including its expertise, financial position, and available opportunities, without comparing it to any hypothetical reasonable business. Outcomes can shift sharply depending on whether the performing party is a startup or a Fortune 500 company.
- Unenforceability for vagueness. A small number of courts have refused to enforce best efforts clauses at all, ruling them too indefinite to create a binding obligation unless the contract includes specific performance benchmarks like sales quotas or deadlines.
A party that would clearly satisfy the standard in one jurisdiction might be found in breach in another. That uncertainty is the single strongest argument for defining the term inside the contract rather than leaving it for a court to fill in.
Best Efforts vs. Reasonable Efforts vs. Commercially Reasonable Efforts
Parties often assume these three phrases create a clean hierarchy. The reality is less tidy. Several courts have held that the terms are interchangeable, applying an overriding reasonableness standard regardless of the label. Federal courts interpreting New York law, for instance, have treated “best efforts” and “reasonable efforts” as synonymous, requiring only that a party act in good faith in light of its own capabilities.
Where courts do draw distinctions, they tend to break down like this. Reasonable efforts requires at least one sensible course of action. Commercially reasonable efforts requires conduct consistent with what businesses in the same industry typically do. Best efforts requires pursuing all reasonable courses of action, not just one. An English court framed the split neatly: reasonable endeavors probably means taking one reasonable path, while best endeavors probably means taking all reasonable paths available.
Across all three standards, courts agree on certain limits. No efforts clause requires a party to ignore its own legitimate business interests, take every conceivable action no matter how impractical, or act as a fiduciary for the other side. Good faith performance is the floor.
What Best Efforts Requires in Practice
Satisfying the obligation means a party cannot try one approach, watch it fail, and walk away. If the initial strategy doesn’t produce results, the party must pursue alternatives. Courts expect a pattern of continuous engagement, not a single attempt followed by silence.
Concretely, that usually means deploying the right personnel, allocating adequate budget, and treating the obligation as a genuine priority within the organization. If a similarly situated company would assign a dedicated team to a comparable project, the performing party should be doing the same. When bottlenecks arise, resources are expected to move, not the project to stall.
Documentation matters enormously, because best efforts disputes almost always turn on what the performing party actually did. Internal emails, meeting notes, budget allocations, project timelines, and status reports all become evidence. Courts and juries look at whether the party’s own records reflect the level of priority the clause demands. A clear paper trail showing sustained, escalating effort is a far stronger position than informal assurances and verbal updates. If the contract is important enough to include a best efforts clause, the performance is important enough to document.
Financial Limits on the Obligation
Best efforts does not require spending until the company collapses. In Bloor v. Falstaff, the court explicitly rejected the idea that a best efforts clause required the performing party to take actions that “would bankrupt it or result in sales at a substantial loss.” It held that the party had “the right to give reasonable consideration to its own interests,” even while bound by the most demanding efforts standard.1Justia Law. Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258 (S.D.N.Y. 1978)
The boundary sits at genuine economic futility, not ordinary unprofitability. A party that stops investing simply because the project became less profitable than expected will have a hard time defending itself. Courts expect continued effort through uncomfortable financial territory. The question is whether the costs have reached the point where no rational business would keep going, not whether margins have shrunk.
Careful drafting reduces this uncertainty. Parties can include explicit spending caps, carve out actions that would trigger adverse tax consequences, or list specific steps the performing party is not obligated to take. These “prohibited effects” clauses give both sides a clearer picture of where the obligation ends, which is better than leaving the boundary for a court to draw after a dispute has already erupted.
The UCC Rule for Exclusive Dealing
The only major statutory codification of a best efforts obligation appears in UCC ยง 2-306(2), which applies to exclusive dealing arrangements for goods. When a seller or buyer agrees to deal exclusively in a particular kind of goods, the seller must use best efforts to supply them and the buyer must use best efforts to promote their sale, unless the contract says otherwise.2Legal Information Institute. UCC 2-306 – Output, Requirements and Exclusive Dealings
The rule traces to Wood v. Lucy, Lady Duff-Gordon, a 1917 New York case in which Judge Cardozo held that an exclusive marketing arrangement implied an obligation to use reasonable efforts, because without one the deal would lack “such business efficacy as both parties must have intended that at all events it should have.”3New York Courts. Wood v. Lucy, Lady Duff-Gordon The takeaway for exclusive dealing contracts is that a best efforts duty may exist even if the written agreement never uses those words. Outside exclusive dealing arrangements for goods, the obligation generally has to be written in.
Drafting a Best Efforts Clause That Actually Works
Given how much courts disagree on what “best efforts” means, the single most valuable thing a drafter can do is define the term inside the contract. A clause that simply says “Party A shall use its best efforts to achieve X” invites litigation. A clause that specifies what best efforts looks like in context gives both parties a workable roadmap and a court something concrete to enforce.
Effective best efforts clauses typically address five elements:
- Action standard. Specify whether the party must take “all” actions, “all reasonable” actions, or “the reasonable” actions a comparable business would take. Each phrase carries different weight.
- Comparison benchmark. Define who the performing party is measured against: a company of comparable size, one in the same industry, one in the same geographic area, or one similarly situated. The Bloor court used “average, prudent, comparable” as its benchmark, and drafters can borrow that language or tailor it.
- Timeline. State whether the party must act “as expeditiously as possible,” “within a reasonable time,” or by a specific date. Open-ended timing invites foot-dragging.
- Spending limits. Include a cap on required expenditures or specify that the obligation doesn’t require spending beyond a set amount. Without a cap, the financial boundary defaults to the vague “economic futility” standard.
- Carve-outs. List specific actions the performing party is not required to take, such as actions that would trigger material adverse effects on its business, result in litigation exposure, or cause a loss of tax benefits.
Adding objective performance milestones, such as minimum sales volumes, staffing requirements, or reporting schedules, further reduces ambiguity. A contract that ties best efforts to measurable benchmarks is far less likely to produce a dispute than one that leaves the entire question to after-the-fact judicial interpretation. The drafting effort upfront is almost always cheaper than arguing about the clause’s meaning in court.
Remedies When a Party Falls Short
When a court finds that a party breached its best efforts obligation, the most common remedy is compensatory damages. Courts typically measure these by estimating the level of business that would have resulted from reasonably diligent efforts, then awarding the difference between that projection and what actually happened. The calculation is inherently speculative, which makes these cases expensive to litigate and hard to predict.
Specific performance is less common but not unusual in exclusive dealing arrangements. When the performing party’s obligation is unique and the injured party can’t easily find a substitute, damages alone may not make the injured party whole. Courts weigh several factors before ordering it: how difficult the damages calculation would be, whether a substitute arrangement exists, whether the breaching party can actually pay a damages award, and how burdensome the court order would be to supervise.
The burden of proof in a best efforts dispute is preponderance of the evidence. The party alleging breach bears the initial burden of showing that the performing party’s conduct fell below the applicable standard. From there, the performing party typically must demonstrate what it did and why those actions were sufficient under the circumstances. This is where the documentation built during performance becomes the case.