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Best Efforts Clause

A clause setting the effort a party must use toward an outcome, using terms such as reasonable efforts, commercially reasonable efforts, reasonable best efforts, or best efforts, rather than guaranteeing the result.

Reviewed by

GC AI Solutions Team

•

Updated

September 2026

Definition

An efforts clause sets how hard a party must try to achieve an outcome, rather than promising the outcome itself. Contracts use phrases such as reasonable efforts, commercially reasonable efforts, reasonable best efforts, and best efforts, but the labels alone do not establish a universal hierarchy. The required conduct depends on the wording, context, and applicable law. A bare efforts standard should not be treated as an unlimited spending commitment or as permission to avoid costly performance whenever it affects the party's interests. Define the standard, specify required actions, and state any intended financial limits expressly.

What It Does

For in-house counsel, an efforts covenant should tell the business what it must do when progress stalls. A practical test: if regulatory approval is delayed, can the team identify the required filings, cooperation, spending limits, and reporting duties from the agreement?

Sets the effort a party owes toward a specified outcome.
Identifies required actions, deadlines, or an objective benchmark where the parties define them.
Allocates responsibility for cooperation and responding to obstacles.
States any limits on spending, litigation, divestitures, or other concessions.
Provides a standard against which the parties can assess performance using the contract's wording and applicable law.

The Passage Bio license below defines commercially reasonable efforts through a comparable-company benchmark and adds duties to assign responsibility, set objectives, and allocate resources.

When You'll See It

Efforts standards appear in M&A agreements (covenants to close, obtain antitrust and regulatory approvals, and secure financing), license and collaboration agreements (efforts to develop and commercialize, especially in life sciences), distribution and supply agreements (efforts to promote and sell), and registration rights agreements (efforts to get a registration statement effective). The phrase sits inside the operative covenant rather than the boilerplate, which is why it carries real money.

It matters most where the outcome is not fully in the promising party's control: clearing a merger, getting a drug to market, hitting sales of a licensed product. The more the result depends on third parties or future events, the more the parties fight over how hard the promisor has to push, and the more the undefined adjective fails them.

Examples

Nuburu, Inc.

Registration Rights Agreement

Best efforts

One-Sided

2025

"The Company shall use its best efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Effectiveness Deadline."

Source

Hudson Pacific Properties, Inc.

Registration Rights Agreement

Reasonable best efforts

One-Sided

2025

"The Company shall use its reasonable best efforts to cause the Registration Statement to be declared effective by the SEC no later than ninety (90) days after the Closing Date."

Source

SharpLink Gaming, Inc.

At-the-Market Sales Agreement

Commercially reasonable efforts, undefined

One-Sided

2025

"...specifying that it relates to a 'Forward' and requiring the Forward Seller to use commercially reasonable efforts to sell, as specified in such Placement Notice and subject to the terms and conditions of this Agreement and the applicable Forward Contract, the Forward Hedge Securities."

Source

Passage Bio, Inc.

License Agreement

Commercially reasonable efforts, defined

2024

"'Commercially Reasonable Efforts' means the efforts and resources that a similarly situated biotechnology company would use for its own internally discovered technology of similar commercial potential and similar stage of development, taking into account the likely timing of the technology's entry into the market and any patent and other proprietary position, safety and efficacy, product profile..."

Source

Negotiate

Party Relying on Performance:

You want concrete action toward the outcome and enough information to assess progress.

Specify the required steps or an objective benchmark alongside the chosen efforts standard.
For approvals and closings, address filings, cooperation, litigation, and any divestitures the performing party must consider.
Set reporting duties, responsible contacts, and a process for addressing obstacles.
Identify any spending limits or exclusions that would prevent the work your business expects.

Party Performing the Obligation:

You want an obligation your team can perform within agreed operational and financial limits.

Define the efforts standard and the business factors the parties agree may inform performance.
Specify spending limits and any excluded litigation, asset sales, or other concessions.
Identify the cooperation, information, and approvals you need from the counterparty.
Separate required actions from outcomes that depend on regulators or other third parties.

Check the operative covenant against the definition: a broad promise to take specified steps can create obligations beyond the efforts label alone.

Red Flags

An undefined efforts standard on a critical obligation, which leaves the level of required effort to a later dispute.
Assuming best efforts and commercially reasonable efforts have fixed, different meanings based on the labels alone, without checking the contract and governing law.
A best efforts obligation with no cost or reasonableness boundary, which one side may read as unlimited.
Different efforts standards used across the same agreement with no definitions, creating internal ambiguity about what is owed.

FAQs

There is no universal rule that best efforts requires more than commercially reasonable efforts. In Akorn, the Delaware Court of Chancery discussed authorities treating different efforts formulations as reasonableness obligations. In Holland Loader, a federal court applying New York law assessed commercially reasonable efforts against an objective industry standard. Read the particular covenant, any definition, and the applicable authorities; specify the actions and limits the parties intend instead of relying on the adjective alone.

The label alone does not establish a universally highest standard. In Akorn, the Delaware Court of Chancery discussed overlapping reasonableness obligations under different efforts formulations. A contract may impose more demanding duties through its definition or specific required actions, so compare those obligations rather than assume that the words best efforts settle the issue.

A bare best efforts obligation is not a promise to spend unlimited money, but cost or reduced profitability does not automatically excuse performance. In Bloor v. Falstaff, the Second Circuit held that the contract did not require bankruptcy or substantial losses, yet required more than ordinary attention to the promisor's own profitability. Read any specific spending or performance commitments alongside the efforts language, and state an intended spending cap expressly.

Courts interpret the wording in its contractual and legal context, but Delaware and New York authorities should not be collapsed into one universal rule. In Akorn, the Delaware Court of Chancery discussed overlapping reasonableness obligations under different efforts formulations. In Bloor v. Falstaff, the Second Circuit assessed best efforts in light of the particular contract and good-faith performance; in Holland Loader, a federal court applying New York law used an objective industry standard for commercially reasonable efforts. Definitions, required actions, and express limits therefore matter alongside the chosen label.

Yes, where the obligation is important. An objective benchmark or list of required actions gives both sides a clearer basis for assessing performance. Interpretation and enforceability still depend on the full agreement and applicable law.

This content is for informational purposes only and does not constitute legal advice.

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