Best efforts and commercially reasonable efforts sit next to each other in contracts all the time, but they ask for different things. A best efforts clause requires a party to pursue every reasonable path toward the goal, even when the effort is expensive or inconvenient. A commercially reasonable efforts clause lets that same party weigh cost against benefit and act the way a comparable business in the industry would act. The gap matters, but it is narrower than most people assume, because courts in several major jurisdictions have started treating the two standards as close to interchangeable when the contract does not spell out what performance looks like.
What a Best Efforts Clause Actually Demands
A best efforts obligation traces back to the Uniform Commercial Code, which imposes the standard on both sides of an exclusive dealing arrangement: the seller must use best efforts to supply the goods, and the buyer must use best efforts to promote their sale.1Legal Information Institute. UCC 2-306 – Output, Requirements and Exclusive Dealings That statutory baseline shaped how courts read best efforts across every kind of contract.
The clearest picture of the standard in practice comes from Bloor v. Falstaff Brewing. Falstaff bought the Ballantine beer brand and agreed to use best efforts to maintain a high volume of sales. Instead, it cut marketing staff, closed distribution centers, and virtually eliminated advertising for the brand. The court held Falstaff had breached, saying best efforts required the company to promote the brand “in good faith and to the extent of its own total capabilities.”2Justia Law. Bloor v Falstaff Brewing Corp, 454 F Supp 258 (SDNY 1978) “Capabilities” carried real weight in that decision. The court read it to cover more than financial ability — marketing expertise, distribution networks, and industry experience all counted.
The standard does have ceilings. A party bound by best efforts is not required to bankrupt itself or chase actions that are obviously futile. Courts have consistently held that best efforts stops short of requiring every conceivable measure. Reasonableness depends on the facts: the size of the company, the difficulty of the task, industry conditions, and how much time has passed. But when a party has the resources and simply chooses not to deploy them, as Falstaff did, that is exactly the failure courts punish.
One point that catches parties off guard: under a best efforts clause, the burden of proof typically falls on the party that failed to perform. If the task turned out to be impossible, that party has to show failure was inevitable regardless of what it did. Defending that position is harder than most people expect when they sign.
What a Commercially Reasonable Efforts Clause Demands
Commercially reasonable efforts is a more forgiving standard. Performance is measured against what a typical business in the same industry would do under similar circumstances. The key difference from best efforts is that the performing party can factor in its own financial interests. If an action would cost far more than the expected benefit, a commercially reasonable standard does not require it. The party still owes good faith business judgment, but it does not have to sacrifice profitability or absorb outsized risk.
Courts evaluate this standard by looking outward at comparable companies rather than inward at the performing party’s private calculations. The question is whether the actions taken line up with accepted practices in the relevant industry. A pharmaceutical company deciding whether to continue developing a drug would be measured against what similar companies with similar resources would do at the same stage, taking into account likelihood of regulatory approval, commercial potential, and the costs involved. Delaware courts examining this standard in the pharmaceutical context have found that the specific contract language matters a great deal. One agreement’s commercially reasonable efforts clause might permit the company to weigh its own opportunity costs and milestone payments; another might restrict the analysis to what is typical for companies of similar size.
The practical upshot is that commercially reasonable efforts gives the performing party room to say “we looked at this, and the numbers didn’t make sense.” That argument rarely works under a best efforts clause unless the path was truly irrational.
Why the Labels Alone May Not Decide the Case
A growing body of case law treats the two standards as closer to interchangeable than deal lawyers would like. The conventional wisdom among practitioners places efforts clauses in a hierarchy running from good faith efforts at the bottom to best efforts at the top, with commercially reasonable and reasonable best efforts in between. Courts have not reliably enforced that hierarchy.
Delaware, one of the most influential jurisdictions for commercial disputes, has moved toward flattening the distinctions. In Energy Transfer v. Williams Companies, the Delaware Supreme Court interpreted a “reasonable best efforts” clause in a merger agreement without drawing sharp lines between it and other reasonableness-based standards. The court focused on whether the party took all reasonable steps to satisfy the obligation rather than parsing whether “reasonable best efforts” demanded more or less than plain “reasonable efforts.” It also confirmed that even a robust efforts obligation does not require a party to surrender its own contractual rights for the benefit of the other side.3Justia Law. Energy Transfer, LP v The Williams Companies, Inc
The takeaway is not that the labels are meaningless. It is that you cannot rely on a label alone to do the work. If the distinction between best efforts and commercially reasonable efforts genuinely matters to your deal, the contract has to spell out what actions are required or excluded. Otherwise a court may simply ask whether the party acted reasonably and leave the label alone.
How Courts Measure Whether You Did Enough
When a dispute reaches a courtroom, judges look at concrete evidence of what the party actually did, not what it says it intended to do. The analysis starts with the contract language. Courts examine whether the agreement defined the efforts standard, listed required actions, or included benchmarks that clarify what performance should look like. Surrounding provisions matter too, because other parts of the contract can signal how much effort the parties contemplated.
From there, the focus shifts to documentation. Internal emails, budget records, staffing decisions, meeting notes, and strategic plans all become evidence. If a company allocated significant resources, assigned dedicated personnel, and pursued multiple strategies, that record supports a finding that the standard was met. If the record shows inaction, delayed responses, or resource decisions that prioritized other projects, courts will draw the opposite conclusion. In Bloor v. Falstaff, the evidence that Falstaff had gutted its distribution network and eliminated advertising made the breach finding straightforward.2Justia Law. Bloor v Falstaff Brewing Corp, 454 F Supp 258 (SDNY 1978)
Courts also weigh external factors: market conditions, regulatory changes, and actions by third parties. A downturn that made the goal harder to reach is treated differently than a party’s own decision to redirect resources elsewhere. The distinction between “we tried and the world got in the way” and “we didn’t try hard enough” often decides the case.
When the Clause Is Too Vague to Enforce
Not every efforts clause survives a court challenge. Courts in some jurisdictions, including Illinois and Delaware, have refused to enforce efforts clauses they found too vague to create a meaningful obligation. If the clause says nothing more than “party shall use commercially reasonable efforts” without any context about what that means in practice, a court may decide there is no enforceable standard to measure against. Defining the term inside the contract and including objective criteria is the best protection.
The Good Faith Floor
Whichever label the contract uses, the implied covenant of good faith and fair dealing sets a baseline neither party can drop below. Even where the contract gives one side discretion in how it performs, that discretion has to be exercised in good faith. A party that technically follows the letter of an efforts clause while actively undermining the goal can still face liability under the implied covenant. Every efforts standard, no matter how lenient, requires at minimum an honest attempt to perform.
What Happens When a Party Falls Short
The most common remedy for breaching an efforts clause is compensatory damages designed to put the non-breaching party in the position it would have occupied if the contract had been performed. In practice, that means the injured party has to show what it lost, usually expected profits from the deal. If those lost profits are too speculative to calculate, courts may award reliance damages instead, covering expenses the injured party incurred in reliance on the contract. The shift from expectation to reliance damages is common in efforts clause disputes precisely because the outcome was never guaranteed, making it hard to prove what would have happened with proper effort.
Beyond money damages, a breach can trigger termination rights written into the agreement. Many commercial contracts tie the right to walk away from a deal to whether the other side met its efforts obligations. In merger agreements, a party that fails to use the required efforts to obtain regulatory approval may lose the right to close and forfeit deposits or break-up fees. The financial exposure from triggering a termination clause often dwarfs whatever the party was trying to save by cutting corners on effort.
Drafting So the Clause Actually Means Something
The most important drafting decision is not which label to pick. It is how specifically you define what performance looks like. A well-drafted efforts clause converts an abstract commitment into concrete obligations that both sides understand and a court can measure.
- Set a maximum dollar amount the performing party must spend pursuing the objective. Spending caps eliminate arguments about whether a particular expenditure was required, and they protect the performing party from open-ended exposure while giving the other side a guaranteed minimum investment.
- Commit to specific staffing or resource levels. Vague promises to “devote resources” invite disputes; specifying a minimum headcount or percentage of the relevant team does not.
- Set time-bound milestones for specific stages of the project. Without deadlines, a performing party can delay indefinitely while claiming to be working on the problem.
- List carve-outs for actions the party is not required to take, like filing a lawsuit against a third party, violating other contractual obligations, or paying fees above a stated threshold. That prevents the other side from arguing the clause required something the party never agreed to do.
- Where possible, define objective success criteria. If the goal is obtaining a government permit, the clause can specify which agencies must be contacted, what applications must be filed, and how many follow-up communications are expected.
The more specific the clause, the less room a court has to impose its own interpretation. Parties that rely on a bare “best efforts” or “commercially reasonable efforts” label without any supporting definition are essentially asking a judge to decide after the fact what they should have done. That is an expensive gamble, and neither side can predict the outcome with confidence.