“Best efforts” sounds stronger than “commercially reasonable efforts,” and in theory it is: a best efforts obligation asks a party to use its full capabilities toward the goal, while a commercially reasonable efforts obligation lets the party weigh cost against likely benefit. In practice, courts in major commercial jurisdictions have repeatedly said they cannot find meaningful daylight between the two when the contract leaves them undefined. The comparison of commercially reasonable efforts vs. best efforts matters much less than most negotiators assume, and the definition you write into the clause matters much more.
What Best Efforts Is Supposed to Require
The idea that “best efforts” forces a party to bankrupt itself is wrong. Courts have consistently held that a best efforts obligation does not require a party to disregard its own reasonable interests or spend itself into insolvency. What it does require is that the party pursue all reasonable methods to fulfill the obligation and act the way a competent participant in the same industry would act under similar circumstances.
The leading case is Bloor v. Falstaff Brewing Corp., where the court held that “best efforts” obligated the buyer to promote the seller’s beer brand “in good faith and to the extent of its own total capabilities.” The court explained that “capability” means more than money; it includes marketing expertise, industry experience, and the opportunities a party creates or encounters. Falstaff was not required to match what a larger competitor like Anheuser-Busch could have done, but it was required to use its own full toolkit, and it failed to do so.1Justia Law. Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258 (S.D.N.Y. 1978)
“Total capabilities” is not the same as unlimited sacrifice. Courts qualify best efforts with a reasonableness test. A party bound by the standard is not required to incur extraordinary expenses, pursue baseless strategies, or take every conceivable action within its power. It must make reasonably diligent efforts based on the specific facts of the deal. If an obstacle arises, the party must actively work around it through reasonable means; documenting the problem and shrugging is not enough. But no court expects a party to burn down its business in the process.
What Commercially Reasonable Efforts Is Supposed to Require
Commercially reasonable efforts is pegged to what a sensible business would do under similar circumstances. The performing party can weigh the cost of continued effort against the likelihood of success and the value of the deal. If pursuing the objective stops making economic sense from the performing party’s own perspective, the obligation to keep pushing generally ends.
This standard explicitly permits the party to consider its own operational health, financial condition, and long-term viability. A company bound by commercially reasonable efforts is not expected to take actions that produce a net financial loss disproportionate to the contract’s value. If a deal is worth $50,000, spending $60,000 to clear a minor hurdle exceeds what the standard demands. The Delaware Supreme Court interpreted a commercially reasonable efforts clause as placing “an affirmative obligation… to take all reasonable steps” toward the stated objective, and the word “reasonable” does real work in that formulation, anchoring the analysis to practical business judgment.
Industry custom does most of the measuring. Courts assess the party’s actions against what companies of similar size and scope typically do for comparable products or services at comparable stages. Evidence of how competitors handled similar situations is directly relevant. In one earnout dispute, a court found it significant that competitors were all advancing their programs while the defendant had deprioritized its own; that gap between industry behavior and the party’s conduct became the evidence of breach.
Do Courts Actually Treat Them Differently?
Often, no. Many courts have found no meaningful distinction between the two phrases when the contract does not define either. Delaware’s Chancery Court has explicitly stated that it has interpreted best efforts obligations “as on par with commercially reasonable efforts” and has “struggled to discern daylight between them.” Other courts have reached similar conclusions, treating variations of efforts clauses, particularly those including the word “reasonable,” as largely interchangeable.
That creates a real problem for parties who negotiate hard to get “best efforts” into a deal believing it creates a more rigorous duty. Without a contractual definition establishing what best efforts actually requires — specific actions, spending thresholds, timelines — the party may discover in litigation that a court reads it no differently than commercially reasonable efforts. The assumed hierarchy of efforts standards (best > commercially reasonable > reasonable > good faith) lives more in practitioner folklore than in consistent judicial application.
Not every jurisdiction collapses the standards, and some courts do treat best efforts as the most demanding obligation. The point is that the label alone is a gamble. A party who wants to hold the other side to a higher level of effort has to build that expectation into the text of the contract rather than trust a judge to import a hierarchy the drafter had in mind.
The Good Faith Floor and the UCC Default
Whichever efforts standard a contract uses, the implied covenant of good faith and fair dealing operates as a floor beneath it. Every contract governed by the UCC carries an obligation of good faith in performance and enforcement.2Legal Information Institute. UCC 1-304 – Obligation of Good Faith For merchants, good faith means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade.3Legal Information Institute. UCC 2-103 – Definitions and Index of Definitions The covenant cannot be waived. Even under a low efforts standard, neither party can act in a way that destroys the other party’s right to receive the benefits of the deal. A party that games a loosely worded clause to avoid performing may still face liability under this implied duty.
One boundary worth flagging: if your contract is an exclusive supply or distribution arrangement for goods, best efforts is imposed on you automatically. Under UCC § 2-306(2), an exclusive dealing agreement requires the seller to use best efforts to supply the goods and the buyer to use best efforts to promote their sale, unless the parties agree otherwise.4Legal Information Institute. UCC 2-306 – Output, Requirements and Exclusive Dealings You do not have to write the phrase into the contract for the obligation to exist. The only way to lower the standard is to expressly agree to a different one.
Drafting a Clause That Actually Works
The most effective thing you can do is stop relying on the phrase and start defining what compliance looks like. Courts interpret undefined efforts terms by looking at surrounding facts and circumstances, which gives them enormous discretion. Concrete drafting reduces that discretion.
The strongest efforts clauses include several concrete elements:
- Spending floors or caps. A minimum amount the performing party must invest, or a maximum beyond which it has no obligation. A clause might require spending at least $200,000 on regulatory approval efforts, or provide that no expenditure exceeding 15% of the deal value is required.
- Timelines. Deadlines for specific actions rather than open-ended obligations. “Within 90 days of signing” is far more enforceable than “as expeditiously as possible.”
- Enumerated actions. A list of specific steps the party must take, such as filing particular applications, hiring specific personnel, or maintaining a certain production capacity. If the steps are taken, the obligation is satisfied regardless of outcome.
- Enumerated carve-outs. Actions the party is explicitly not required to take, such as commencing litigation, divesting assets, or accepting terms materially different from the original deal.
- Measurement benchmarks. Comparisons to companies of similar size in the same industry, or to the party’s own past efforts for similar projects.
Drafting by negation is underused. A sentence like “for the avoidance of doubt, this obligation does not require extraordinary or extreme efforts” anchors the lower boundary. On the other side, “the party must devote no fewer resources than it devotes to its own comparable products” anchors the upper boundary. The more concrete the language, the more predictable the outcome.
Where These Fights Actually Happen
Efforts clause litigation shows up in two places: regulatory approvals and post-acquisition earnouts. Regulatory disputes arise when a deal is conditioned on a government sign-off and the party responsible for the filing arguably drags its feet. Earnout disputes are more common and more bitter.
In a typical earnout, a buyer acquires a company and agrees to pay the seller additional money if the acquired business hits certain milestones such as revenue targets, product launches, or regulatory clearances. The buyer commits to some version of efforts to pursue those milestones. The conflict is structural: the buyer now controls the business and has every incentive to allocate resources toward its own priorities rather than toward triggering additional payments to the seller.
Courts have found breach in earnout disputes where a buyer gave “starkly different treatment” to the acquired product compared to its own competing product, where a buyer’s actions actively impaired the acquired product’s development, and where a buyer terminated a program to pursue merger synergies after a later acquisition. The common thread is that the buyer made decisions driven by its own corporate strategy rather than the factors a hypothetical company would have considered when developing the earnout product.
If you are selling into a deal with an earnout, the efforts clause may be the most important provision in the agreement. A vague commercially reasonable efforts obligation without specific milestones, reporting requirements, and operational commitments gives the buyer wide room to deprioritize your product. If you are the buyer, agreeing to an undefined best efforts obligation toward targets you do not fully control is accepting risk you probably have not priced.