Contractual Standards: Distinctions Without A Difference?

Commercial agreements typically specify specific standards in describing the degree of effort that a party is expected to undertake in

order to carry out certain contractual obligations. For example, in many contracts, reference is made to one or the other party to the contract undertaking its "best efforts," "reasonable efforts" or "commercially reasonable efforts." Often, much time and attention is devoted to negotiating which of these standards will apply. Nevertheless, ambiguities remain as to the precise meaning of each of such standards. As we discuss below, these standards are inconsistently interpreted by courts and are often subjectively applied. That said, practitioners generally understand that "best efforts" is considered the highest of these standards requiring a party to undertake every action, short of bankruptcy, to accomplish the stated objective. On the other hand, "reasonable efforts" is perceived to be a less stringent standard, allowing a party