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What is a Best Efforts Clause in a Contract?

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Falstaff kept the $1 million a year advertising running but gutted Ballantine's distribution. The best efforts promise was still broken.

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Overview

A best efforts clause is a promise to work at a result, not a promise to deliver it. What counts is judged from the outside: what a diligent party in your position would have done, set against what you actually did. It is why one brewer could keep $1 million a year of advertising running and still be found to have broken the promise. But falling short is not automatically a breach. Ruining yourself to avoid one was never required either.

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Overview

Best efforts is not a vibe. Nobody grades how hard it felt. A court asks what a competent outfit would have done, then checks what you did. Quietly putting your own products first is what actually catches people out. One brewer paid $4 million for a beer brand, promised best efforts to sell it, and lost in court over how it ran distribution. Two limits, though. You never had to win, and you never had to bury yourself trying. 😎

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Detail

A best efforts clause binds you to work at a result. That promise is about effort, not outcome, but the effort itself is judged from outside: what a diligent party in your position would have done, set against what you actually did. Spending is evidence, and it is not a defence. In 1972 a brewer paid $4 million for the Ballantine beer labels and distribution network, plus an extra $0.50 for every barrel sold afterward, and promised best efforts to keep sales high. It kept the previous owner's $1 million a year advertising running. It also closed the depot serving small neighbourhood bars and shops, chose weaker distributors, and did not treat the brand evenhandedly against its own. The court awarded damages for the broken promise. A separate $1.1 million a year liquidated damages clause never applied, because that one required walking away from the brand entirely, and poor promotion was not that. The promise itself has a ceiling too: nobody has to bankrupt themselves or trade at a substantial loss to satisfy it. The case turned on the words best efforts, but the exact label matters less than people expect. Contracts also use reasonable efforts and commercially reasonable efforts, which lawyers rank below best efforts, though judges have found little support for the ranking.

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Detail

Best efforts sounds like a mood, but it's a receipt. Nobody asks how committed you felt. Somebody eventually asks what you actually did, and compares it to what a competent outfit in your spot would have done. That is the whole test. Favouring your own stuff over what you promised to push is the fastest way to fail it, whatever your invoices say. You are not on the hook to burn the place down trying either: no bankrupting yourself, no fire-sale pricing, just to tick the box. All that said, the label on the promise is a secondary fight. Deals also use reasonable efforts, commercially reasonable efforts, good faith efforts, and the trade stacks those under best efforts on a ladder. Courts mostly do not buy that ladder, Delaware included, and tend to read a reasonableness test into whichever word you picked. So argue about the label if you want, but the real fix is boring. Write down which channels, how much spend, what deadline. A line promising commercially reasonable efforts is an argument waiting to happen. A line promising 40 customer visits a quarter is not. 😎

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Analogy

You hire an agent to sell your flat, and the same agent has a rival flat on their books two streets away. A best efforts promise means yours gets the photographs, the listings and the viewings, on the same footing as the other one. It does not mean the agent has to spend without limit, or push you into a quick loss just to close the deal. What actually breaks the promise is simpler: every buyer who calls gets steered toward the other flat instead. That pattern is what a court would look at, not what the agent says they meant to do.

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Analogy

You ask a friend to feed your cat for a fortnight. Best efforts is not just meaning well. They turn up twice a day, and when the key jams they ring you or the neighbour instead of going home. Severe weather closes the roads on the Thursday, they miss one visit and go first thing Friday. That is fine. Nobody promised to drive through a storm. What is not fine is feeding their own cat at seven and getting to yours whenever. Same care as their own cat, not leftover care, is what the promise buys. 😎

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AI explanations may contain errors · Not professional advice

Formal definition — The same term, explained the usual way

A best efforts clause is a contractual undertaking to pursue a specified objective through diligent action, as distinct from a warranty that the objective will be achieved. The standard is objective. Performance is assessed against what a reasonably diligent party in comparable circumstances would have done, and proof of bad faith is not required to establish breach. In Bloor v. Falstaff Brewing Corp., 601 F.2d 609 (2d Cir. 1979), affirming 454 F. Supp. 258 (S.D.N.Y. 1978), a purchaser that had covenanted to use its best efforts to promote and maintain a high volume of sales was held to have breached notwithstanding continued advertising expenditure, having curtailed distribution and subordinated the acquired brands to its own; the court nonetheless held that the covenant did not oblige the purchaser to bankrupt itself or to trade at a substantial loss. Practitioners commonly treat best efforts, reasonable best efforts, commercially reasonable efforts and reasonable efforts as a descending hierarchy, but Delaware and New York decisions have found little support for those distinctions and imply a reasonableness standard regardless of the formulation used. Where the intended level of obligation is material, it should be defined expressly in the agreement.

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