Legal News

Be cautious about agreeing to use your “best efforts” in a contract

Employment contracts, settlement agreements, and other commercial documents often include reference to one or both of the parties using “best efforts” to perform some task or achieve some goal. This “best efforts” phrasing can be a convenient shorthand when the exact process for performing the task or achieving the goal is unknown or too complicated to set out in detail in the contract. For example, an employment contract might require the employee to use their “best efforts” to promptly obtain any required security clearance or authorization to work if required to do so by the employer. Or, as occurred in Salager v. Dye & Durham Corporation 2018 BCSC 438, an agreement settling a wrongful dismissal claim might require an employer to use their “best efforts” to facilitate the employee complying with tax obligations.

While employing the language of “best efforts” can be a useful drafting technique in appropriate contexts, it can be tempting to use it as an easy compromise without careful thought to the extent of the obligation it actually imposes. As the decision in Salager reminds us, that obligation is onerous and not one that should be entered into lightly. In Salager the BC Supreme Court once again cited with approval its previous summary of the law on the meaning of “best efforts” from Atmospheric Diving Systems Inc. v. International Hard Suits Inc., [1994] B.C.J. No. 493:

  1. “Best efforts” imposes a higher obligation than a “reasonable effort”.
  2. “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.
  3. “Best efforts” includes doing everything known to be usual, necessary and proper for ensuring the success of the endeavour.
  4. The meaning of “best efforts” is, however, not boundless. It must be approached in the light of the particular contract, the parties to it and the contract’s overall purpose as reflected in its language.
  5. 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.
  6. Evidence of “inevitable failure” is relevant to the issue of causation of damage but not to the issue of liability. The onus to show that failure was inevitable regardless of whether the defendant made “best efforts” rests on the defendant.
  7. 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.

Next time you are faced with a contract requiring you to use your “best efforts”, give some thought to what “leaving no stone unturned” would really entail before you sign on the dotted line. You might be better off using your “best efforts” now to negotiate different contractual language.