By Michele van Eck

The purpose of commercial contracts is to record the obligations of one party in relation to another. These obligations should be set out with some level of certainty. But what often happens is that certainty is diminished through the use of the efforts standards, which includes the use of terminology such as ‘best efforts’ or ‘reasonable efforts’ or variants of these. It should be noted that the terms ‘effort’ and ‘endeavour’ can be used interchangeably. In using these efforts standards the question is: How hard should a party try to fulfil such an obligation?

Currently the South African courts still have to make a determination on whether there is a difference between reasonable and best efforts when fulfilling an obligation and, should a difference exist, exactly what such a difference may entail.

As a starting point it appears obvious that, if the normal grammatical meanings of the words are applied, there will be a different meaning to the words ‘reasonable’ and ‘best’. The mere fact that the words in isolation appear to have different meanings does not necessarily imply that such words would result in a different level of fulfilment of obligations. When interpreting the meaning of such words it is important to consider these meanings in the context of the document in which they appear.

Should the courts interpret the meaning of these terms they would likely apply the following principles to assist in establishing the meaning of the words (SJ Cornelius Principles of the Interpretation of Contracts in South Africa 2ed (Durban: LexisNexis 2007) at 119 – 122):

• Words are used in their ordinary sense.
• A court will take judicial notice of the ordinary grammatical meaning of the words.
• Words are used precisely and exactly.
• The same word or expression in the same contract has the same meaning.
• Different words or expressions indicates different meanings.
• There are no superfluous words in a contract.

How this will be applied in South Africa remains unclear, however, it can be reasonably concluded that, should the principles of interpretation be applied, there will be a difference in the meaning of reasonable efforts and best efforts.

In order to obtain further clarity on this matter, the courts may take notice of decisions in foreign jurisdictions. Although the purpose of this article is not to go into an in-depth discussion of these decisions, it is worth noting that there is significant commentary on this matter. Only a selection will be discussed in this article to illustrate the difference between the efforts standards.

An English court case, Rhodia International Holdings Inc v Huntsman International LLC [2007] EWHC 292 (Comm) at para 33, provides some clarity on the requirements for the efforts standards. The court summarised the difference between the efforts standards as follows: ‘An obligation to use reasonable endeavours to achieve the aim probably only requires a party to take one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all the reasonable courses he can.’

There have been a number of decisions in the United States of America relating to the difference between the two effort standards. It would be far too voluminous to address all these matters in this article; however, it appears that the conclusion can be drawn that there is a different requirement for the fulfilment of reasonable efforts versus that of best efforts. What is also apparent is that it is generally accepted that best efforts is a more onerous obligation to fulfil than that of reasonable efforts. There is still some uncertainty exactly what the best efforts standard requires (Kenneth A Adams ‘Understanding “Best Efforts” and its Variants (including drafting recommendations)’ The Practical Lawyer August (2004).

In a British Columbia Supreme Court decision, Atmospheric Diving Systems Inc v International Hard Suits Inc (1994) 89 BCLR (2d) 356 (SC) the court attempted to clarify the effort required when a party uses his best efforts. Some of the principles can be summarised as:

• Best efforts would impose a higher obligation than reasonable efforts.
• Best efforts include doing everything known to be usual, necessary and proper for ensuring the success of the endeavour.
• The meaning of best efforts is not endless and should be approached in the light of the particular contract, its purpose and the parties.

The term best efforts does not seem to imply that a party should put itself in a commercially detrimental position, but it does, however, appear that it would include that everything that can be done should be done. As highlighted in the Atmospheric Diving Systems case, the extent in which best efforts will be fulfilled is to be linked to the context of the contract, the language used and the intention of the parties.

Due to the uncertainty of the use of the efforts standards, the best approach is probably not to use the efforts standards at all, but this may not always be practical. Kenneth A Adams suggests that, should the efforts standards be used, then the terms reasonable efforts and best efforts should be defined in the contract (supra). This may be a solution in limiting the uncertainty surrounding the efforts standard, but does not clarify how the courts would interpret the effort standards.

In conclusion, special care should be taken when using the effort standards in contracts or any other legal instrument. This should not only apply to transactions that have an international element to it, but also to those with a purely South African application.

Michele van Eck BCom LLM (UJ) is a legal adviser in Johannesburg.

This article was first published in De Rebus in 2013 (Sept) DR 19.