What Are Your “Best Efforts?”

Many business to business agreements require the parties to use their “best efforts.” However, in California there is no real definition of what “best efforts” entails. Rather, to date, such language has been defined by what it does not mean. The Court of Appeals in California Pines Property Owners Assn. v. Pedotti (2012) 206 Cal. App. 4th 384 struggled with the meaning and provided some parameters:

• A best efforts clause, without more, does not create a fiduciary relationship.
• Best efforts are to be construed in the context of the circumstances of the particular case.
• A best efforts clause is to be reconciled with other provisions of the contract to the extent possible.
• Best efforts does not mean every conceivable effort and does not require the promisor to ignore its own interests, spend itself into bankruptcy, or incur substantial losses to perform its contractual obligations.
• Best efforts require diligence, but it is diligence within the bounds of reasonableness.
• A promise to use best efforts should not be confused with a promise to act in good faith.

These general guidelines at least clarify that best efforts are not necessarily the same as a fiduciary relationship or good faith. California courts will look to the entirety of the contract to determine whether a promisor has used its best efforts. Ultimately, best efforts do not require the promisor to make unreasonable efforts. What is unreasonable, however, is a question for the Court or jury. If you have a contract that calls for best efforts, or are negotiating a contract where a certain degree of effort needs to be assured, check with your legal counsel. It may be in your best interest to specifically delimit what those efforts entail rather than rely on the nebulous nature of a best efforts clause.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.