In a recent bid to renew its athlete agreement, a Canadian bobsled pilot was left without funding due to a dispute over the terms of his agreement.[1] Athletes are required to sign an agreement with their national sport organization (NSO) before they can receive federal funding. However, concerned about the language surrounding the obligations of parties, which were defined as NSO using their “reasonable efforts to…” and the athlete using his “best efforts to…”, the athlete chose not to sign the agreement, for he found the obligations to be one-sided.
Over the years, the terms “best efforts”, “reasonable efforts”, and more recently, “commercially reasonable best efforts”, have been subject of considerable judicial interpretation. Although, one may not put much emphasis on the implications of these varied terms, at law, there is a significant legal difference between the standard that is applied to their definition. While the term “best efforts” has been interpreted fairly consistently, the standard for other commonly used terms, such as “reasonable efforts” or “commercially reasonable best efforts”, have commonly been determined by the facts surrounding the case. In general, the courts have established that an obligation to use “best efforts” imposes a higher standard than some of its other counterpart phrases commonly found in contracts.
Let’s dive in and see how the courts have generally interpreted these terms:
- Best Efforts
The leading case on the interpretation of “best efforts” is Atmospheric Diving Systems Inc.[2], in which the standard was enumerated as follows:
- “Best efforts” imposes a higher obligation than a “reasonable effort”.
- “Best efforts” means taking, in good faith, all reasonable steps to achieve the objective, carrying the process to its logical conclusion and leaving no stone unturned. However, it does not require a party to sacrifice itself totally to the economic interests of the party to whom the duty is owed, although the interests of the other party must predominate.[3]
- “Best efforts” includes doing everything known to be usual, necessary and proper for ensuring the success of the endeavour.
- The meaning of “best efforts” is, however, not boundless. It must be approached in light of the particular contract, the parties to it and the contract’s overall purpose as reflected in its language.
- While “best efforts” of the defendant must be subject to such overriding obligations as honesty and fair dealing, it is not necessary for the plaintiff to prove that the defendant acted in bad faith.
- Evidence of “inevitable failure” is relevant to the issue of causation of damage but not to the issue of liability. The onus to establish that failure was inevitable regardless of whether the defendant made “best efforts” rests on the defendant.
- Evidence that the defendant, had it acted diligently, could have satisfied the “best efforts” test, is relevant evidence that the defendant did not use its best efforts.
- Mere reasonable efforts will not suffice to meet the “best efforts” standard. Neither will occasional efforts made from time to time suffice. A higher level of effort is required.
This means that “best efforts” does not require a party to “sacrifice itself totally” to the economic interests of the other party, but it does require for the interests of the other party to be of high priority.
- Reasonable Efforts or Commercially Reasonable Efforts
Generally, the terms “reasonable efforts” and “commercially reasonable efforts” have been interpreted interchangeability. Canadian courts have found that “reasonable” implies “sound judgment,” and “commercial” means “having profit or financial gain” rather than a loss as the main purpose. This suggests that, unlike a “best efforts” obligation, the reasonable commercial efforts standard allows a party to reasonably consider its own financial interests in deciding when to cease further efforts.
- Commercially Reasonable Best Efforts
Up until recently, there has been little judicial consideration of the term “commercially reasonable best efforts”. However, in the recent case of Sutter Hill[4], the British Columbia Court of Appeal gave some guidance as to its meaning, concluding that the intention of the parties was somewhere between “commercially reasonable efforts” and “best efforts”.
Conclusion
Despite some clarifications, there remains considerable uncertainty in how the courts deal with the “reasonable effort” or “commercially reasonable best effort” clauses in contracts. Although, it is clear that much weight is given to the circumstances surrounding the facts of a case. On the other hand, however, the “best efforts” standard imposes onerous obligations, while also offering some certainty over what level of effort is required.
[1] https://www.cbc.ca/sports/olympics/winter/bobsleigh/bobsleigh-skeleton-chris-spring-without-funding-1.6550232.
[2] Atmospheric Diving Systems Inc. v. International Hard Suits Inc. (1994), 89 B.C.L.R. (2d) 356 (B.C. S.C.).
[3] Eastwalsh Homes Ltd. v. Anatal Developments Ltd., 1993 CanLII 3431 (ON CA).
[4] Sutter Hill Management Corporation v. Mpire Capital Corporation, 2022 BCCA 13.
