Canada: Interpreting "Efforts" In Commercial Contracts

Encountering the phrases, "best efforts", "reasonable efforts" and "commercially reasonable efforts" in commercial contracts sans definition leaves enough latitude for interpretation to cause uncertainty.  Nevertheless, a considerable amount of jurisprudence does provide some guidance.

A hierarchy has been accepted whereby "best efforts" imposes the most onerous requirement in comparison to "reasonable efforts" or "commercial reasonable efforts". As between the latter two phrases, the courts have yet to clearly delineate the difference, if any.

In Atmospheric Diving Systems Inc. v International Hard Suits Inc., the BC Supreme Court summarizes existing case law to describe "best efforts" as follows:

The court cautioned that each analysis is a fact-based one, and that there is no absolute duty to achieve the contractual objective. Rather, the analysis will require an examination of whether the individual was acting in good faith with a true attempt at fulfilling the obligation. In sum, there is a high expectation of performance balanced by a standard of reasonableness.

The term "reasonable" has been judicially interpreted to mean the taking of all reasonable and measured steps to achieve an objective in the circumstances. Reasonableness is defined more by what it does not require, rather than by what it does require, in the given circumstances. The standard of reasonableness does not require an individual to expend efforts to the point of undue hardship.

The distinction, if there is one, is unclear between the phrases, "reasonable efforts" and "commercially reasonable efforts". Not yet judicially determined, it can be contended that both phrases, in a commercial context, reference the same standard of effort.  While it may be suggested that "commercially reasonable efforts" means pursuing an objective until it becomes economically unreasonable for an individual to continue, it is arguable that the concept of "reasonable efforts" would yield substantively the same interpretation of effort in a commercial context.

In light of this open-to-interpretation and contextualized understanding of the differences between "best efforts", "reasonable efforts" and "commercially reasonable efforts", parties to a commercial contract would be prudent to clearly define the specific, tangible actions that must be taken in order to fulfill a particular "efforts" standard.

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