Three phrases appear in commercial contracts with striking frequency, often used interchangeably by the lawyers and business people who draft them: ‘best efforts,’ ‘reasonable efforts,’ and ‘commercially reasonable efforts.’ Despite their similarity, these terms do not mean the same thing, and the choice between them can have real consequences when performance falls short and a dispute arises. Courts across the United States have wrestled with the meaning of each standard, producing a body of case law that is not entirely consistent but that reveals meaningful distinctions worth understanding.
The stakes are practical. If your contract obligates you to use ‘best efforts’ to obtain regulatory approval, find a strategic partner, or market a product, you need to know what that commitment actually requires of you. If you believe the other side’s ‘commercially reasonable efforts’ obligation means they must try as hard as possible without regard for their own costs and interests, you may be wrong. Misunderstanding these standards leads to misaligned expectations, inadequate performance, and disputes that could have been avoided with cleaner drafting.
Best Efforts: The Highest Standard
Best efforts is the most demanding of the three standards and the one courts have struggled with most. In some jurisdictions, courts have interpreted ‘best efforts’ literally and expansively, holding that it requires a party to make every possible effort, exhaust every available means, and potentially sacrifice their own economic interests in pursuit of the contractual objective. Under this interpretation, a party obligated to use best efforts must essentially do whatever it takes, short of actions that are illegal or genuinely impossible.
This interpretation creates obvious problems for commercial parties. No business can sensibly commit to pursue an objective at all costs without regard to their own financial interests and other obligations. A distributor who agrees to use best efforts to sell a manufacturer’s products cannot reasonably be expected to sell at a loss indefinitely or to abandon all other product lines. Courts in most jurisdictions have recognized this concern and have moved away from the most absolute interpretations of the best efforts standard.
The more nuanced and widely followed approach treats best efforts as requiring a party to use all reasonable means at their disposal, taking into account their own interests and capabilities, to achieve the contractual objective. Under this interpretation, best efforts is more demanding than reasonable efforts but still contextual — the required level of effort is calibrated to what is reasonable given the party’s situation, resources, and the nature of the obligation. A well-resourced company committed to best efforts will generally be expected to devote significant resources to the objective; a small startup will be evaluated by a different standard.
One leading approach, developed primarily in New York case law, equates best efforts with a good-faith standard applied to the specific circumstances of the party making the commitment. This formulation asks whether the party took all steps that, in good faith, a reasonable party in their position would take to achieve the goal. Under this approach, best efforts does not require a party to act against their own fundamental interests, but it does require genuine, diligent pursuit of the objective rather than perfunctory or half-hearted effort.
Reasonable Efforts: The Middle Ground
Reasonable efforts is generally understood as a less demanding standard than best efforts. Where best efforts emphasizes thoroughness and priority — the idea that the party should elevate this objective above competing considerations — reasonable efforts simply requires the party to do what a reasonable person in their position would do under the circumstances. This is an objective, externally referenced standard: the question is not what this particular party could have done if they had tried as hard as possible, but what reasonable conduct in the industry and circumstances would look like.
In practice, reasonable efforts allows a party to balance the contractual commitment against their other obligations and interests in a way that best efforts arguably does not. A party using reasonable efforts to obtain financing can take into account the cost of capital, the impact on their balance sheet, and the availability of alternatives without being found in breach simply because they did not pursue every conceivable option. The standard asks for genuine, competent effort — not exhaustive pursuit at any cost.
Some jurisdictions treat ‘reasonable efforts’ and ‘best efforts’ as synonymous, which only adds to the interpretive uncertainty. New York has a body of case law suggesting the two terms are not identical. Delaware courts have also grappled with the distinction. California courts have approached the question from different angles in different cases. The inconsistency across jurisdictions means that the same language in the same contract may be interpreted differently depending on which state’s law applies — another reason why forum selection and choice of law provisions matter.
Commercially Reasonable Efforts: The Business Standard
Commercially reasonable efforts is the standard most commonly found in sophisticated commercial contracts and has the most predictable legal meaning. This standard asks what a reasonable commercial actor — specifically, a business person pursuing their own economic interests — would do in the circumstances. It expressly incorporates the party’s own business judgment and economic interests into the standard of performance.
The commercially reasonable efforts standard explicitly acknowledges that a contracting party is not required to act against their own economic interests in fulfilling the obligation. A licensor required to use commercially reasonable efforts to promote a product does not have to spend money on marketing that would cost more than it generates. A party required to use commercially reasonable efforts to obtain a governmental permit can factor in the cost and likelihood of success in deciding how aggressively to pursue the application. The standard calibrates performance to what a reasonably self-interested business actor would do.
Because commercially reasonable efforts incorporates a built-in self-interest component, it is the most favorable standard from the perspective of the party making the commitment. If you are being asked to use your best efforts to achieve something that may be expensive, difficult, or uncertain, pushing for commercially reasonable efforts language gives you more latitude to balance that commitment against your other obligations and interests. Conversely, if you are the party relying on the other side’s efforts, best efforts or reasonable efforts gives you stronger grounds to demand more aggressive performance.
The UCC uses commercially reasonable standards extensively, particularly in the context of a secured party’s obligations upon sale of collateral and in other specific contexts. The prevalence of this standard in statutory and common law commercial frameworks has contributed to its widespread acceptance in private commercial contracts.
How Courts Evaluate Compliance with Effort Standards
Regardless of which effort standard applies, courts face a common challenge in evaluating whether the obligation was met: the standard does not specify particular actions. Courts must assess the totality of the party’s conduct in light of the circumstances. In practice, this means looking at what the party actually did, when they did it, how much they spent, what alternatives they considered, and how their performance compared to what reasonable parties in similar situations do.
Courts also look at what the party doing not do and why. If a party facing a best efforts obligation abandoned promising avenues without meaningful explanation, failed to respond to obvious opportunities, delayed unreasonably, or clearly prioritized conflicting interests at the expense of the contractual objective, these facts weigh against finding compliance. The party must be able to demonstrate that they approached the obligation with genuine commitment, not simply that they made some effort and then moved on when things became difficult.
Industry custom and practice plays a significant role. What do companies in this industry typically do when facing this type of obligation? If the standard in your industry for developing and launching a new product involves a particular sequence of activities and level of investment, a party who did significantly less than that customary level of effort will have difficulty establishing compliance with a best efforts or commercially reasonable efforts standard.
Documentation matters enormously in effort standard disputes. The party who can point to detailed records of what they did — meetings held, resources committed, vendors contacted, alternatives explored, decisions made and why — is in a much stronger position than the party who must rely on oral testimony about their good intentions. If you are operating under an effort standard obligation, document your efforts contemporaneously. If a dispute arises, that documentation may be the most important evidence you have.
Drafting Recommendations
The single most effective way to avoid disputes about effort standards is to supplement the general standard with specific obligations. Rather than simply requiring ‘best efforts to develop and commercialize the product,’ specify what those efforts mean: a development timeline, minimum investment levels, required regulatory filings, distribution milestones, or marketing spend commitments. The more specific you can be about what the required effort looks like in practice, the less room there is for dispute about whether the standard was met.
Choose the standard deliberately rather than by default. If you are drafting the contract, select the standard that reflects your actual risk allocation. If you need the other side to genuinely prioritize this obligation above competing considerations, best efforts may be appropriate. If you want to ensure a committed effort while preserving the other side’s ability to exercise reasonable business judgment, commercially reasonable efforts may be the right choice. Do not simply copy the standard from a prior contract or use whatever standard the other side’s draft includes without thinking about what you actually want.
Consider including a definition in the contract that specifies what the chosen effort standard means for the particular obligations at issue. Definitional language like ‘Commercially Reasonable Efforts means, with respect to a given obligation, those efforts and resources that a similarly situated company in the [industry] industry would reasonably expend in pursuing such obligation’ provides a reference point that reduces interpretive uncertainty. This approach is particularly valuable in long-term contracts, license agreements, and joint venture arrangements where effort obligations are central to the deal’s economics.