A reader passed on to me a “Commercial Contracts Newsflash” that he received from the international law firm Ashurst. It concerns Rhodia International Holdings Ltd. v. Huntsman International LLC, [2007] EWHC 292 (Comm), an English case decided on February 21, 2007, by the Queen’s Bench Division. (Click here for a copy of this case; as for the Newsflash, it doesn’t appear to be available online.)
In this case, the judge offers in dictum the following thoughts on the distinction between best endeavours and reasonable endeavours:
I am not convinced that (apart from that decision of Rougier J) any of the judges in the cases upon which Mr Beazley relied were directing their minds specifically to the issue whether “best endeavours” and “reasonable endeavours” mean the same thing. As a matter of language and business common sense, untrammelled by authority, one would surely conclude that they did not. This is because there may be a number of reasonable courses which could be taken in a given situation to achieve a particular aim. An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all the reasonable courses he can. In that context, it may well be that an obligation to use all reasonable endeavours equates with using best endeavours and it seems to me that is essentially what Mustill J is saying in the Overseas Buyers case. One has a similar sense from a later passage at the end of the judgment of Buckley LJ in IBM v Rockware Glass at 343, to which Mr Edwards-Stuart QC for Huntsman drew my attention.
Without further ado, let me suggest that this is codswallop.
As a matter of semantics, in this context best constitutes rhetorical emphasis. (That again! See here, here, and here for more on that topic.)
If I say, “To the best of my knowledge, my goat didn’t eat your daffodils,” the phrase the best of doesn’t serve to indicate that I’m calling on a higher level of knowledge that I wouldn’t be tapping into if I merely said “To my knowledge, my goat didn’t eat your daffodils.”
Instead, my adding the best of simply represents a way of my acknowledging that in terms of its formality and perhaps importance, the matter of the goat and the daffodils comes a notch above the mundane.
The best in best endeavours and its U.S. counterpart, best efforts, serves the same function. (In the interests of concision, in the remainder of this post I’ll be referring just to efforts rather than to efforts and endeavours.) That’s why in the U.S., courts construing best efforts and other efforts formulations have variously said that the standard is one of good faith, reasonableness, or diligence, regardless of the formulation. (I’ve written about this in chapter 7 of MSCD and in this article.)
More generally, the idea that best efforts represents a higher standard than reasonable efforts is an inherently unpromising one. In invoking that standard, you’d essentially be saying “I’m not insisting that you act reasonably. Instead, I’m insisting that you act unreasonably!” I’d just as soon not have to make that argument.
So much for the judge’s assertion that “as a matter of language and business common sense … one would surely conclude” that best endeavours and reasonable endeavours do not mean the same thing. And his attempt to flesh out the distinction is too skimpy and circular to be of use. But in his defense, innumerable practitioners are under the same misapprehension.
So what’s a practitioner to do? Here are my suggestions:
- If you want a party to be held to a reasonableness standard, use the phrase reasonable efforts, not best efforts. If the context is a sensitive one, use reasonable efforts as a defined term. (For suggestions on how to define reasonable efforts, see this article.)
- If you want to impose on a party a duty to make efforts beyond the efforts that would be required under a reasonable efforts standard, impose explicit obligations rather than relying on a vague efforts standard.
- If the other side in a transaction insists that your client be subject to a best efforts standard, suggest to them gently that the better analysis is that best efforts and reasonable efforts mean the same thing. Try to assess what particular obligations, if any, they have in mind and attempt to address them directly.
These recommendations are broadly in line with the suggestions that Ashurst makes in its Newsflash.
I’ve tried your last point many times. Usually, the customer’s response is: “What, you’re not going to give me your best???” It’s always a sticky discussion with customers. Eric.
I often find myself wrestling with an opposing who insists on “commercially reasonable efforts”. Very similar to your reasoning, my usual line is that if you cannot give me a brightline explanation as to why this phrasing is different or better, let’s be reasonable and choose “reasonable efforts”. What is your opinion with regard to qualifying an efforts cluase with “in accordance with industry standard practice” or some such verbiage?
John: I wouldn’t be inclined to limit a reasonable efforts standard by tacking on “in accordance with industry standard practice” or anything similar. Ken
I won’t comment on whether “best efforts” represents a higher standard than “reasonable efforts.”
However, I would like to point out what I see as the main problem with the reasoning presenting in the dictum, even conceding the point that there is a difference in the two standards.
The dictum defines ‘best efforts” as ALL reasonable efforts. Thus, holding a party to such standard would require not only that it choose and use the best of all reasonable endeavors, but that it use ALL reasonable endeavors.
This is potentially even more onerous than I would have imagined “best efforts” to require (if there is a distinction between “best” and “reasonable”). I would have expected “best efforts” to require a party to determine and use the best endeavor among the reasonable set of endeavors.
JB: I recommend that you not attempt to draw a distinction between reasonable endeavours and all reasonable endeavours: that way lies madness.
The only question you need ask is whether best endeavours represents a stricter standard that reasonable endeavours. I have no hesitation saying that the two phrases mean that same thing. Coming to a different conclusion requires a tin ear, in terms of the semantics involved, and requires that you consider the question purely on a theoretical rather than a practical level.
I don’t want to start repeating myself on this subject, so I’ll just add the following example: John’s mother is coming to London for a weekend on the town, and she wants to see “Coriolanus.” John tells her, “I’ll do my best to get tickets.” He learns that the show is sold out. Does doing his best require that he purchase tickets from a scalper (or “tout,” for U.K. readers)? Does it require that he pay any price for the tickets, even fifty times the face value?
I suggest that we’d only expect John to do what’s reasonable in the context. And I suggest that the same approach applies when interpreting a best endeavours standard in a contract.
Ken
I’m not entirely convinced by the rethirocal emphasis argument. For instance, “proceed with appropriate caution” does not necessarily convey the same meaning as “proceed with extreme caution” (although it might, see below).
However, if the aim is to make a party go above and beyond the call of duty, this should be achieved by stating the reason for making him do so, ie. why such a demand is reasonable. Above all this helps to clarify what is actualy expected from the parties, preventing dispute to arise in the first place. Also, in the event of dispute, it prevents the outcome from being dependent on the courts personal views on the reasonable/best debate.