A best efforts clause in a contract obligates you to actively pursue the stated objective using the full range of your capabilities, not just to avoid sabotaging it. Courts decide whether you satisfied that duty by looking at two things: what your own resources and expertise made possible, and what a comparable business in your position would have done. Meeting the standard usually requires a documented pattern of trying, adjusting, and trying again until every reasonable path is exhausted.
What the Clause Actually Requires
The duty comes out of commercial law’s treatment of exclusive dealing arrangements. Under UCC § 2-306, a party to an exclusive dealing contract must use best efforts to supply or promote the goods covered by the agreement. The provision codified what courts had already been requiring where one party held an exclusive right without a spelled-out performance obligation.
Every UCC contract also carries a baseline duty of good faith in performance and enforcement.1Legal Information Institute. UCC 1-304 Obligation of Good Faith A best efforts clause layers on top of that floor. Avoiding bad faith is not enough. You have to chase the result with persistence and real resource commitment.
The standard has limits. You are not required to drive your business into insolvency or abandon your core operations. American courts have generally held that you cannot ignore your own legitimate interests entirely, but you also cannot deprioritize the contractual goal every time something more profitable turns up. Best efforts sits closer to the guarantee end of the spectrum than most people realize when they sign the clause.
How Courts Measure Whether You Met It
The leading framework comes from Bloor v. Falstaff Brewing Corp., where a brewing company promised to use best efforts to promote a brand it had acquired. When sales collapsed, the court set out a two-prong test: a subjective measure of the promisor’s own total capabilities, and an objective comparison to what an “average, prudent, comparable” business would have done in the same position.2Justia Law. Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258 (S.D.N.Y. 1978)
The subjective prong asks what your company specifically could have done. Marketing expertise, distribution networks, technical knowledge, established vendor relationships — if you have relevant assets, courts expect you to deploy them. The objective prong asks what a similarly situated business would have done. You are not measured against the industry leader or the smallest player, but against a reasonable peer with comparable resources.
Financial pressure alone will not excuse a lower level of effort. In Bloor, Falstaff argued that its financial difficulties justified its reduced promotional activity. The court rejected that argument, drawing a line between financial ability and overall capability. Falstaff had marketing expertise and distribution infrastructure it chose not to use, and that gap between what it could have done and what it actually did was the breach.2Justia Law. Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258 (S.D.N.Y. 1978)
One procedural point matters a great deal. The performing party typically carries the burden of proving there was nothing significant it could have done to advance the contractual goal that would not have been financially disastrous. That is a heavy burden. If viable paths existed and you did not take them, courts are unlikely to accept your explanation for stopping.
How Best Efforts Compares to Related Standards
Contracts use several effort-based terms, and parties often assume they line up on a clear sliding scale. The commonly cited hierarchy, from most demanding to least, runs like this:
- Best efforts is the most rigorous. It calls for pursuit of every reasonable avenue using the full scope of your capabilities.
- Reasonable best efforts is a hybrid term seen in merger agreements and regulatory contexts. It generally requires meaningful, commercially sensible steps toward the outcome.
- Commercially reasonable efforts lets you weigh the cost of an action against its likely benefit and your broader business interests.
- Reasonable efforts is more moderate and typically allows consideration of business practicalities.
- Good faith is the floor, present in every UCC contract whether stated or not. It prevents deliberate sabotage but does not demand active pursuit.1Legal Information Institute. UCC 1-304 Obligation of Good Faith
Here is the complication. That hierarchy is not universally recognized. Some courts treat “best efforts” and “reasonable efforts” as interchangeable, imposing the same duty to act in good faith given your capabilities. Others enforce a strict hierarchy where best efforts demands materially more. A minority of courts have found best efforts clauses unenforceable when the contract supplies no objective criteria for measuring performance.
You cannot rely on the label alone. If your contract says “best efforts” without defining what that means in context, a court will decide for itself based on the surrounding circumstances. That unpredictability is a problem you can address at drafting.
What Compliance Looks Like in Practice
Talking about effort is easy. Proving it takes a specific, traceable pattern of conduct. Courts look for active, repeated attempts to clear obstacles, not passive waiting for results.
If your first approach fails, you need a second. A denied permit application means refiling with modifications or appealing. A supplier that cannot deliver means finding alternative vendors. Stalled negotiations with a third party mean returning with revised terms rather than treating the first rejection as final. That cycle of action, reassessment, and re-engagement is the backbone of a best efforts defense.
Resource allocation tells the story that words cannot. Assigning qualified personnel, committing a budget proportional to the importance of the obligation, and bringing in outside specialists when internal expertise runs short all show that you took the goal seriously. Handing the project to a junior employee working part-time while your senior team focuses on unrelated revenue projects sends the opposite signal.
You also have to use what you already have. Proprietary tools, established vendor relationships, industry connections — keeping any of these on the sideline looks deliberate under the Bloor standard, which judges you on the full scope of your capabilities and not just the resources you chose to spend.2Justia Law. Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258 (S.D.N.Y. 1978)
Stopping is allowed only when every feasible method has been tested and exhausted. “It got expensive” or “it became inconvenient” will not clear that bar. “Every available path led to a dead end, and further spending would threaten our ability to operate” is closer to the standard you need to meet.
Documentation That Backs You Up
Documentation is not optional. It is what separates a legitimate defense from an argument about what you remember doing. Date-stamped records of phone calls, emails, meetings, and negotiations related to the contractual goal form the foundation. Internal strategy memos are especially valuable because they capture the reasoning behind decisions in real time; a memo written months ago explaining why you shifted from Vendor A to Vendor B carries more weight than a retroactive explanation during litigation.
Financial and personnel records fill in the rest. Budget line items for legal fees, consultant costs, filing fees, and related expenses should be traceable. Time-tracking logs show the human capital you committed. Invoices from third-party consultants verify that you reached outside when your internal team hit a wall. Together, these records paint a picture of proportional commitment. If you routinely dedicate five-figure budgets to your own product launches but allocated a fraction of that to the contractual obligation, the imbalance becomes evidence of halfhearted effort.
Drafting a Clause That Reduces Disputes
Most best efforts disputes happen because the parties agreed to vague language and later disagreed about what it meant. You can eliminate a lot of that risk by defining the term inside the contract and setting objective benchmarks.
Rather than leaving “best efforts” to judicial interpretation, spell out what compliance looks like. A supply agreement might require the supplier to maintain minimum staffing levels, operate facilities around the clock when necessary, prioritize the buyer’s orders over competing orders, and subcontract fulfillment when internal capacity falls short. Framing that list as non-exclusive gives both sides a concrete checklist while preserving flexibility.
Timetables and milestone events help define when the obligation activates and when it ends. Some clauses trigger the duty only on a specific event, such as a regulatory denial or a supply chain disruption. Others set periodic review dates where the parties assess progress. Without these markers, the performing party faces an open-ended obligation with no clear finish line.
Spending is often the sharpest point of dispute. Expenditure caps address it directly. A carve-out might state that neither party is required to incur liability, make additional expenditures beyond a specified amount, or forfeit existing contractual rights in pursuit of the goal. If you are the party making the commitment, push for a spending cap or a percentage of contract value. If you are the party receiving it, resist language that guts the obligation.
Finally, address what happens when reasonable efforts still do not produce the result. A safe harbor provision can state that if the performing party complies with all listed benchmarks and the objective still is not reached, the failure is not a breach. That protects against liability for outcomes driven by external variables like third-party consent, government approval, or market conditions.
What Happens If You Fall Short
When a court finds a party failed to satisfy its best efforts duty, the non-breaching party can pursue several categories of damages. The goal is to put the injured party in the position it would have occupied had the contract been performed.
Expectation damages are the most common. They cover the benefit of the bargain: the value the non-breaching party would have received from full performance, plus incidental and consequential losses caused by the breach, minus costs avoided by not having to perform any remaining obligations. If the clause related to promoting a product and the promoting party neglected the duty, lost profits from reduced sales form the core of the claim.
Reliance damages offer an alternative when lost profits are too speculative to calculate. They reimburse the non-breaching party for money already spent in preparation for or reliance on the contract, such as inventory investments, staff hires, or business opportunities turned down based on the other party’s commitment.
Specific performance is rare here. Courts generally reserve it for situations where money cannot adequately compensate the harm, and ordering a reluctant party to use its “best efforts” going forward creates obvious enforcement problems. Monetary damages are the far more common outcome.
If you are on the receiving end of a breach, you cannot simply let losses accumulate and hand over the bill. Contract law imposes a duty to mitigate. Failing to search for a replacement provider, neglecting to renegotiate timelines, or refusing to explore alternatives can reduce or even eliminate the breaching party’s liability for losses you could have avoided. The standard is reasonableness, not perfection: you do not have to accept a materially worse deal or spend disproportionate amounts, but you do have to act like someone trying to minimize the harm rather than maximize the claim. Courts reduce damage awards by the amount reasonable mitigation would have saved, whether or not you actually made the effort.