Best Efforts vs. Reasonable Efforts: Key Differences

TL;DR: The efforts standard you choose can be the difference between a binding obligation and an empty promise, yet most contracts treat "best efforts," "reasonable efforts," and "commercially reasonable efforts" as interchangeable filler language. They are not. Courts have imposed dramatically different obligations depending on which standard appears in the contract, the jurisdiction governing it, and whether the parties bothered to define the term. "Best efforts" can require a party to take steps against its own commercial interest. "Commercially reasonable efforts" almost certainly does not. And in some jurisdictions, courts have held that all three mean essentially the same thing, rendering hours of negotiation pointless. The hierarchy that most lawyers assume exists (best efforts > reasonable efforts > commercially reasonable efforts) is real in some courts and a myth in others. If you are drafting or negotiating an efforts clause without specifying objective criteria, you are building on sand.

What Is a Best Efforts Clause?

A best efforts clause (and its siblings, "reasonable efforts" and "commercially reasonable efforts") is a contractual provision that qualifies a party's obligation to perform by reference to a standard of diligence rather than an absolute guarantee of outcome. Instead of promising "Party A shall obtain regulatory approval," the contract reads "Party A shall use its best efforts to obtain regulatory approval." The efforts qualifier transforms an absolute obligation into a process-based one: the party must try, but is not strictly liable for failure.

These clauses appear whenever a contractual obligation depends on factors outside a party's complete control, including third-party consents, regulatory approvals, market conditions, or the actions of counterparties. They serve as the contractual middle ground between an unconditional promise and no obligation at all.

The most commonly encountered standards, in descending order of perceived stringency, are:

Best efforts (or "best endeavours" in UK/Commonwealth jurisdictions): The most demanding standard, potentially requiring a party to subordinate its own commercial interests.
All reasonable efforts (or "all reasonable endeavours"): Requires exhausting every reasonable avenue, with some potential subordination of self-interest.
Reasonable efforts (or "reasonable endeavours"): Requires the party to take steps that a reasonable and prudent person would take, generally without acting against its own commercial interests.
Commercially reasonable efforts: The least demanding standard, permitting the obligated party to weigh its own business interests and market conditions.

Why It Matters

Litigation risk: Efforts clauses are among the most frequently litigated contract provisions precisely because they are vague. Without objective criteria, what constitutes sufficient "effort" becomes a factual dispute that often requires trial.
Allocation of risk: The choice between "best" and "commercially reasonable" efforts fundamentally shifts risk. A best efforts obligation can require expenditure of significant resources; a commercially reasonable efforts standard permits cost-benefit analysis.
Deal economics: In M&A earnout provisions, the efforts standard governing the buyer's post-closing operations can determine whether the seller ever receives contingent consideration. A weak standard lets the buyer prioritize its own products.
Regulatory approvals: In transactions requiring antitrust or other regulatory clearance, the efforts standard determines whether a party must divest assets, accept behavioral remedies, or litigate with regulators to close the deal.
Enforceability concerns: In some jurisdictions, an undefined "best efforts" obligation may be deemed unenforceable for vagueness. Defining the term within the contract eliminates this risk.
Cross-border complexity: "Best efforts" in a New York-law contract means something different than "best endeavours" in an English-law contract. Multi-jurisdictional deals require careful attention to the governing law's treatment of these terms.

Key Elements of a Well-Drafted Best Efforts Clause

Specify the efforts standard explicitly: Choose from the recognized hierarchy and use precise language. Do not assume that "best efforts" and "reasonable efforts" are interchangeable, even if some courts have treated them that way.
Define the standard within the contract: Rather than relying on case law, include a definition section that specifies what the chosen efforts standard requires. For example: "'Commercially Reasonable Efforts' means efforts consistent with those that a similarly situated company in the same industry would use to achieve the relevant objective, taking into account commercial considerations including cost, risk, and likelihood of success."
Include objective criteria and milestones: Specify measurable benchmarks, such as minimum spend thresholds, staffing requirements, regulatory filing deadlines, or the number of customer contacts. This reduces ambiguity and simplifies enforcement.
State whether self-interest may be considered: Expressly address whether the obligated party may take into account its own commercial interests, competitive position, or financial condition in determining the scope of its efforts.
Specify excluded actions: List actions the obligated party is not required to take, such as commencing litigation, making material divestitures, accepting unfavorable terms from third parties, or spending more than a stated amount.
Address the duration of the obligation: State when the efforts obligation begins and when it terminates, especially in earn-out or milestone-based arrangements.
Include reporting requirements: Require the obligated party to provide periodic updates on actions taken, obstacles encountered, and planned next steps. This creates a contemporaneous record that is invaluable in disputes.
Specify remedies for breach: Address whether breach of the efforts obligation gives rise to damages, specific performance, or termination rights. Consider whether a material breach standard applies or whether any failure to meet stated criteria triggers remedies.

Market Position & Benchmarks

Where Does Your Clause Fall?

Seller/obligee-favorable: "Best efforts" or "all reasonable efforts" without carve-outs for self-interest. Requires the obligated party to take all reasonable steps, potentially at significant cost, to achieve the stated objective.
Market standard: "Commercially reasonable efforts" with a contractual definition referencing industry-standard practices, no requirement to act against material self-interest, and specific exclusions for litigation, divestitures, or material expenditures.
Buyer/obligor-favorable: "Reasonable efforts" with broad carve-outs permitting the obligated party to consider its own commercial interests, competitive position, and other business priorities. May include a cap on required expenditures.

Market Data

According to the ABA Private Target Deal Points Studies, approximately 67% of M&A transactions requiring regulatory approvals use a "commercially reasonable efforts" standard for the approval covenant.
In the 2020-2021 ABA study period, 40% of operating covenants were qualified by an efforts standard, up from a historical average of approximately 15%.
The 2025 ABA Private Target Deal Points Study continues to show "commercially reasonable efforts" as the dominant standard in private M&A, particularly for interim operating covenants and regulatory approval obligations.
In technology licensing agreements, "commercially reasonable efforts" appears in approximately 70-80% of development milestone obligations.
In pharmaceutical licensing deals, best efforts or diligent efforts standards are more common for development and commercialization obligations, reflecting the higher stakes and longer timelines involved.

Sample Language by Position

Obligee-favorable (best efforts): "Buyer shall use its best efforts to obtain all Regulatory Approvals necessary to consummate the transactions contemplated hereby, including by proposing, negotiating, committing to, and effecting any divestitures, hold-separate arrangements, or other remedies required by any Governmental Authority, regardless of the effect on Buyer's business."

Market standard (commercially reasonable efforts): "Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper, or advisable under applicable Law to consummate the transactions contemplated by this Agreement as promptly as practicable, provided that neither Party shall be required to take any action that would constitute a Burdensome Condition."

Obligor-favorable (reasonable efforts with carve-outs): "Buyer shall use reasonable efforts to obtain the Required Consents; provided, however, that Buyer shall not be required to (i) commence or participate in any litigation or administrative proceeding, (ii) make any payment or concession not contemplated by this Agreement, (iii) divest or hold separate any assets or business, or (iv) agree to any material modification of Buyer's business practices or operations."

Example Clause Language

M&A (Stock Purchase Agreement): "From the date hereof until the Closing, Seller shall use commercially reasonable efforts to operate the Business in the ordinary course of business consistent with past practice and to preserve intact the Business's relationships with customers, suppliers, licensors, licensees, and employees. Without limiting the foregoing, Seller shall use commercially reasonable efforts to (a) maintain all material Permits, (b) keep available the services of its current officers and key employees, and (c) maintain its current insurance policies or comparable replacement policies."

Technology License Agreement: "Licensee shall use diligent, commercially reasonable efforts to develop and commercialize at least one Licensed Product in each Major Market Country. Such efforts shall include, without limitation, (i) allocating sufficient qualified personnel, (ii) maintaining a development budget of no less than $[amount] per calendar year, (iii) achieving the development milestones set forth in Exhibit B within the timelines specified therein, and (iv) providing Licensor with quarterly written progress reports."

Commercial Supply Agreement: "Supplier shall use its best efforts to meet the delivery schedule set forth in each Purchase Order. In the event Supplier anticipates any delay in meeting a confirmed delivery date, Supplier shall promptly notify Buyer and use best efforts to minimize such delay, including by allocating available inventory to Buyer on a priority basis and, if necessary, utilizing expedited shipping at Supplier's expense."

Common Contract Types

Mergers and acquisitions: Regulatory approval covenants, interim operating covenants, non-solicitation provisions, and earn-out obligations
Technology licensing: Development milestones, commercialization obligations, and patent prosecution duties
Pharmaceutical and biotech agreements: Drug development, clinical trial obligations, and regulatory submission timelines
Real estate transactions: Zoning approvals, environmental remediation, and financing contingencies
Supply and distribution agreements: Delivery schedules, inventory maintenance, and marketing obligations
Joint ventures and strategic alliances: Capital contribution obligations and business development commitments
Employment and consulting agreements: Non-competition enforcement and business development targets
Loan agreements: Financial covenant compliance and collateral maintenance

Negotiation Playbook

Key Drafting Notes

Never leave the standard undefined: Include a contractual definition of the chosen efforts standard. This is the single most effective way to reduce litigation risk and align expectations.
Use the "Burdensome Condition" construct: In M&A agreements, define a "Burdensome Condition" as any action that would have a material adverse effect on the buyer's business, and carve it out from the efforts obligation. This is now market standard in mid-market and large-cap deals.
Tie efforts to specific actions where possible: Instead of relying solely on an abstract standard, list concrete steps the obligated party must take (file applications by a certain date, allocate a minimum budget, assign named personnel).
Consider asymmetric standards: The buyer's obligation to obtain regulatory approval might warrant a "best efforts" standard, while the seller's obligation to operate in the ordinary course might warrant only "commercially reasonable efforts."
Address the interaction with MAE clauses: Clarify whether the obligated party may invoke a material adverse effect as a defense for failing to meet the efforts standard, and whether efforts-related failures constitute a breach giving rise to termination rights.
Include a "hell or high water" provision when appropriate: For critical regulatory approvals, the buyer may be required to take all steps necessary to obtain approval regardless of cost, effectively elevating the obligation beyond even "best efforts."

Common Pitfalls

Assuming a hierarchy exists in all jurisdictions: Some courts, particularly in New York, have held that "best efforts," "reasonable efforts," and "commercially reasonable efforts" impose the same obligation. Do not rely on word choice alone to differentiate standards.
Using "efforts" as a crutch for vague obligations: An efforts clause should qualify a specific, identifiable obligation. "Party A shall use best efforts to make the business successful" is likely unenforceable.
Forgetting about the UCC: Under UCC Section 2-306(2), exclusive dealing arrangements impose an implied best efforts obligation on both parties. This may apply even without an express efforts clause.
Ignoring the Bloor v. Falstaff lesson: In this landmark case, the Second Circuit held that Falstaff's lackluster promotional efforts for Ballantine beer violated its best efforts covenant, even though Falstaff argued its own financial difficulties justified reduced efforts. Financial hardship does not excuse a best efforts obligation.
Conflating efforts with results: An efforts obligation is a process standard, not a results guarantee. Draft the clause to make clear what actions are required, not merely what outcome is desired.
Neglecting to address competing interests: If the obligated party has products or businesses that compete with the subject of the efforts obligation, expressly address whether and how the party must prioritize the contractual obligation over its competing interests.
Failing to include reporting obligations: Without a contemporaneous record of efforts taken, proving breach (or compliance) becomes a battle of competing narratives at trial.

Jurisdiction Notes

United States: There is no uniform federal standard for interpreting efforts clauses. New York courts have historically been skeptical of distinctions between efforts standards, with several decisions suggesting that "best efforts," "reasonable efforts," and "commercially reasonable efforts" impose substantially similar obligations. Delaware courts, by contrast, have been more willing to recognize a hierarchy and have imposed rigorous obligations under "best efforts" standards, particularly in the M&A context. The Second Circuit's decision in Bloor v. Falstaff Brewing Corp. (1979) remains the leading case on best efforts, holding that the standard "has diligence as its essence and is more exacting than the usual contractual duty of good faith." Under the UCC, Section 2-306(2) imposes an implied best efforts obligation in exclusive dealing arrangements. California courts have generally interpreted efforts clauses as requiring good faith and fair dealing, without rigidly distinguishing between different efforts standards.

United Kingdom: English law draws clearer distinctions between endeavours standards than American law. "Best endeavours" requires the promisor to take all steps that a prudent, determined, and reasonable person acting in their own interests would take, as established in IBM United Kingdom Ltd v. Rockware Glass Ltd (1980). In Jet2.com Ltd v. Blackpool Airport Ltd (2012), the Court of Appeal held that a best endeavours clause required the airport to operate outside normal hours at a loss. "Reasonable endeavours" requires only that a party do what is reasonable in the circumstances, generally without acting against its own commercial interests, per Minerva (Wandsworth) Ltd v. Greenland Ram (London) Ltd (2017). "All reasonable endeavours" falls between the two, requiring the obligated party to explore all reasonable courses of action, with some subordination of commercial interests potentially required, as held in Brook Homes (Bicester) Ltd v. Portfolio Property Partners Ltd (2021). The UK Supreme Court's decision in RTI Ltd v. MUR Shipping BV (2024) confirmed that reasonable endeavours must be directed at securing contractual performance, not substitute performance.

Canada and Civil Law Jurisdictions: Canadian courts generally follow the English approach, recognizing a hierarchy between efforts standards. The leading case, Atmospheric Diving Systems Inc. v. International Hard Suits Inc. (1994), held that "best efforts" requires taking all reasonable steps and leaving no stone unturned. Civil law systems (France, Germany, and much of the EU) do not use the efforts clause construct at all, instead distinguishing between obligations of result (obligations de resultat) and obligations of means (obligations de moyens). The UNIDROIT Principles (Article 5.1.4) similarly distinguish between these categories. When drafting cross-border agreements involving civil law jurisdictions, consider whether an efforts clause will be interpreted differently than intended.

Related Clauses

Material Adverse Change (MAC) Clause — Interacts directly with efforts obligations in M&A closing conditions
Exclusivity Clause — Exclusive dealing arrangements may imply best efforts obligations under UCC 2-306(2)
Indemnification Clause — Breach of efforts obligations may trigger indemnification claims
Termination for Cause — Failure to meet efforts standards may constitute a material breach justifying termination
Governing Law Clause — The governing law determines how the efforts standard will be interpreted
Good Faith and Fair Dealing — Efforts obligations are always subject to the implied covenant of good faith
Force Majeure Clause — Force majeure events may excuse or modify efforts obligations
Non-Compete Clause — May conflict with efforts obligations where the obligated party has competing business interests

This glossary entry is intended for educational purposes and does not constitute legal advice. The interpretation and enforcement of efforts clauses varies significantly by jurisdiction, contract type, and factual context. Readers should consult qualified legal counsel for advice on specific contractual provisions. Case law cited is current as of the date of publication and may be subject to subsequent judicial interpretation or legislative change.