Are You Meeting Expectations? A Case For Benchmarking

The authors of a recent US article appearing in Corporate Counsel explored how efforts clauses – that is, contractual provisions that require one party to a contract to exercise some standard of effort to maximize the benefits to be received by the other party to the contract – may be improved. Their hypothesis is simple: parties often expend far too much time negotiating over the adjectives "reasonable" or "best" and far too little time drafting benchmarks into the agreement as an objective measure of how efforts are to be applied. Their conclusion is that open-ended benchmarking assists in ensuring parties understand the bargain they have struck and reduces the risk of disagreements over how an efforts clause should be interpreted. While this advice is sound in principle, and may hold true in other jurisdictions,¹ the legal analysis in Canada is slightly more nuanced.