"Best Efforts" vs. "Commercially Reasonable Efforts": What Each Standard Actually Obligates You to Do

You signed a contract promising to use "best efforts" to secure three new vendor partnerships by the end of Q3. Two fell through entirely. The third strung you along for months before going with a competitor. Your client is now threatening breach-of-contract claims, and your attorney just delivered the bad news: under New York law, the words "best efforts" may have required you to pursue every viable option, reassign staff to the project, and accept deal terms less favorable than you would have chosen on your own — even at a loss. You thought the phrase just meant "try hard." It doesn't.

The three standard effort phrases found in U.S. commercial contracts — "best efforts," "reasonable efforts," and "commercially reasonable efforts" — are not synonyms. Courts, particularly in New York and Delaware (the two states that generate the overwhelming majority of U.S. commercial contract opinions), have developed distinct tests for each phrase, and the differences can determine whether you win or lose a breach claim without the underlying facts changing at all. Picking the right standard also shapes how you perform under the contract: if you know you're held to "best efforts," you document everything; if you know you're held to "commercially reasonable efforts," you can stop when the economics turn irrational.

This isn't an abstract law-review problem. Effort clauses appear in virtually every service contract, distribution arrangement, technology agreement, and consulting engagement. Before you sign your next contract — or draft one — here's what each phrase actually commits you to.

"I'll Do My Best" — Famous Last Words in a Contract

Effort clauses usually end up in contracts by accident. A lawyer for one side proposes "best efforts." The other side's counsel, not wanting to create a negotiation fight over boilerplate, accepts it. Nobody pauses to ask what happens when the obligated party genuinely cannot accomplish the goal. The clause gets signed, the parties move on, and the phrase sits dormant until something goes wrong.

What kinds of obligations attract effort clauses? The most common are:

• Obtaining regulatory approvals: "Seller shall use best efforts to obtain all required government permits within ninety (90) days."
• Marketing and distribution obligations: "Distributor shall use best efforts to promote and maximize sales of the Product in the Territory."
• Securing financing: "Buyer shall use commercially reasonable efforts to obtain mortgage financing on market-standard terms within sixty (60) days."
• Third-party consents: "Each party shall use reasonable efforts to obtain all consents required for the assignment of this Agreement."
• Milestone delivery: "Contractor shall use best efforts to complete Phase 1 deliverables by March 31."

If you're working from a standard service agreement template or a consulting contract draft, there's a reasonable chance at least one of these constructions already appears somewhere in the boilerplate. The question is whether the standard applied actually reflects what you intend — and whether you're prepared for what a court will do with it if things go sideways.

Three Phrases, Three Very Different Commitments

Before getting into cases, here's the practical hierarchy. Most U.S. courts recognize a rough ordering from most to least demanding:

Best efforts → Reasonable efforts → Commercially reasonable efforts

But this ordering is not uniform across all states. Some courts treat "best efforts" and "commercially reasonable efforts" as functionally equivalent. Others apply the classical New York formulation, which makes "best efforts" a genuinely burdensome obligation that can require operating at a loss. Others still have refused to enforce effort clauses altogether, finding them too vague to provide a workable standard — a result that benefits neither party.

The practical lesson is that the phrase you choose matters, but so does whether your contract defines that phrase. An undefined "commercially reasonable efforts" standard in a New York contract will be interpreted by a New York court using New York case law, which may or may not match what you had in mind when you agreed to it. An undefined "best efforts" clause in a Delaware contract may be interpreted more leniently than you expected if you were trying to impose a demanding obligation. You cannot fully control the outcome by phrase selection alone — you have to define what you mean.

Best Efforts: The Highest-Commitment Standard

In New York — and in federal courts applying New York law — the controlling standard for "best efforts" comes largely from Bloor v. Falstaff Brewing Corp., 601 F.2d 609 (2d Cir. 1979). In Bloor, Falstaff had agreed by contract to use "best efforts" to promote and maintain sales of a beer brand it acquired. When Falstaff instead let the brand wither — prioritizing its own financial position and reducing promotion costs — the court held that "best efforts" required Falstaff to take steps "even at a sacrifice" to its own interests, at least to a meaningful degree. Prioritizing the company's overall financial health over its specific contractual obligation was not enough.

The Bloor standard does not require a party to bankrupt itself. Judge Friendly's opinion acknowledged that "best efforts" does not mean a company must pursue an obligation to the point of "financial catastrophe." But the decision drew a clear line: a party cannot claim it used best efforts by pointing to rational business decisions that predictably undermined performance of the very obligation it promised to prioritize. That is a much harder standard to satisfy than most clients and vendors realize when they agree to it.

New York courts have also extended the concept. In Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88 (1917) — still routinely cited a century later — Judge Cardozo found a best-efforts obligation implied in an exclusive marketing arrangement even though the contract never used the phrase. The modern lesson: if your contract creates exclusivity, courts may read in a best-efforts obligation regardless of what the written document says. UCC Section 2-306(2) codifies this for goods contracts: a contract for exclusive dealing in goods imposes by operation of law an obligation on the seller to use best efforts to supply the goods and on the buyer to use best efforts to promote their sale. The phrase doesn't need to appear anywhere in your freelance contract or distribution agreement for the obligation to exist — the UCC puts it there automatically if the deal structure qualifies.

What "Sacrifice" Actually Means in Practice

The Bloor decision's "sacrifice" language is what makes best efforts genuinely different from good faith. In breach-of-contract cases applying that standard, courts have looked at a specific set of factors to determine whether the obligated party actually performed:

• Whether the party maintained adequate staff and resources specifically dedicated to the contractual obligation
• Whether it actively pursued alternatives when the primary approach failed, or simply moved on
• Whether it documented its efforts contemporaneously (meeting notes, emails, third-party correspondence)
• Whether cost-cutting measures it took predictably and foreseeably undermined performance
• Whether it notified the other party of material obstacles before they became outright failures

The documentation point is the one most parties get wrong. In any best-efforts dispute, the first question in discovery is: "Show us what you did." If the answer is "we tried, but informally and without written records," you are in a weak position. The party claiming compliance almost always presents contemporaneous records — meeting minutes, email chains, internal strategy memos, records of outreach to third parties, rejection letters. If you have promised "best efforts" to accomplish something, start building your documentation file the day the contract is signed, not the day you recieve a demand letter.

Courts have also been clear that the standard applies to alternatives. In one of the clearest post-Bloor applications, the Southern District of New York held in Kroboth v. Brent, 625 N.Y.S.2d 748 (N.Y. App. Div. 1995), that best efforts required the obligated party to pursue follow-on options after its primary approach failed. Simply stopping at the first roadblock — even a legitimate one — was not enough to establish compliance.

Reasonable Efforts: Softer, But Not Toothless

"Reasonable efforts" sounds gentler than "best efforts," and in most U.S. jurisdictions it is. But it is not a free pass to do the minimum and declare victory. Courts generally interpret the standard by asking what a reasonable person in the same position, with the same resources and industry knowledge, would have done to perform the obligation. That's closer to a negligence standard than to an absolute duty — but "negligent" performance under a contract that requires "reasonable efforts" is still a breach.

The standard is contextual in a way that "best efforts" is not. Courts applying "reasonable efforts" look at:

• Industry custom and what similarly situated companies typically do in comparable situations
• The resources available to the obligated party, not some abstract ideal
• Whether the parties' own communications during negotiations indicate what "reasonable" was expected to mean
• Whether the obligated party promptly communicated obstacles and worked with the other side to address them
• The economic stakes involved and whether the steps required were proportionate to the value of the contract

One complication: some courts treat "reasonable efforts" and "good faith efforts" as synonyms, which creates a problem because good faith is already implied in every U.S. contract under common law (and under the UCC). If "reasonable efforts" equals good faith, the clause adds nothing beyond what the contract already requires. Other courts treat the phrase as imposing an affirmative duty above mere good faith — something the party must actively do, not just refrain from sabotaging. Which interpretation applies depends on jurisdiction and context, which is exactly why a well-drafted consulting agreement template should define the standard rather than relying on a court to fill in the meaning.

Commercially Reasonable Efforts: The Business-Tested Choice

"Commercially reasonable efforts" is the effort standard most favored by experienced transactional lawyers, and for predictable reasons. It ties the obligation to what a reasonable business entity in similar circumstances would do — which builds in a cost-benefit dimension that "best efforts" explicitly rejects. A party held to "commercially reasonable efforts" can stop pursuing an approach that has become economically irrational without necessarily breaching. That's a materially different risk profile from "best efforts," where stopping because something became unprofitable is precisely the kind of "sacrifice" the Bloor standard requires.

The standard is described in many Delaware decisions as asking: what would a similarly situated commercial entity with comparable resources and objectives do in pursuit of this goal, acting in its own commercial self-interest? That benchmark does something important. It anchors the obligation in business reality. It allows a company to weigh cost against probability of success. And it creates a more predictable standard for both parties to measure performance against during contract execution.

"Commercially reasonable efforts" is the right choice for most commercial performance obligations, including:

• Technology deliverable obligations in software development and website contracts
• Financing conditions in asset purchase agreements and commercial leases
• Third-party consent obligations (particularly in acquisitions and assignments)
• Distribution and promotion obligations where market conditions cannot be guaranteed
• Standard performance obligations in contracts between legal entities with complex, resource-constrained operations

One caveat worth repeating: "commercially reasonable efforts" is not a blanket excuse for minimal performance. Courts will still examine what a similarly situated business would actually have done. A company that claims commercially reasonable efforts but never contacted the relevant third party, stopped after one rejection, or failed to allocate any real resources to the task will not prevail.

Hybrid Phrases You Should Avoid

This is where drafting gets genuinely problematic. Many contracts — especially ones assembled by business owners from multiple online templates, or drafted by non-lawyers adapting prior agreements — end up with hybrid phrases like "reasonable best efforts," "best reasonable efforts," or "diligent efforts." Courts have struggled with these constructions, and the outcomes are inconsistent enough to be dangerous.

In Soroof Trading Development Co. v. GE Fuel Cell Systems LLC, 842 F. Supp. 2d 502 (S.D.N.Y. 2012), the court noted that "best efforts" and "reasonable best efforts" were not meaningfully distinct — and applied the more demanding standard because the word "best" appeared. If your goal was to import the business-friendly predictability of "commercially reasonable efforts" but you accidentally wrote "best reasonable efforts," you may be stuck with the Bloor standard instead.

The same risk applies to "diligent efforts" and "commercially diligent efforts." Some courts have treated "diligent" as synonymous with "best," others have treated it as closer to "reasonable," and a few have declined to apply any coherent standard at all. Unless you want your contract's enforceability to depend on how a particular judge feels about the word "diligent," pick one of the three recognized phrases and define it clearly. The fix is simple enough: after you draft or review any agreement, do a keyword search for every variation of "efforts," "diligent," "endeavors," and "attempt." Standardize on one phrase throughout. Don't invent new formulations.

How New York and Delaware Read These Phrases Differently

Understanding the split between New York and Delaware matters because most U.S. commercial contracts choose one of these two states as their governing law. The two jurisdictions have developed different approaches to effort standards that can produce different outcomes from identical contract language — a particulary significant issue for contracts between legal entities that operate across multiple states.

New York applies the demanding Bloor formulation to "best efforts." The phrase requires genuine prioritization of the contractual obligation, exploration of alternatives when the primary approach fails, and contemporaneous documentation of the steps taken. A party that made rational, self-interested business decisions that predictably undermined performance will not satisfy the New York standard — even if those decisions were reasonable in isolation.

Delaware is generally more business-friendly in its effort standard analysis. Delaware courts — particularly the Court of Chancery — have in several M&A contexts treated "best efforts," "commercially reasonable efforts," and "reasonable best efforts" as functionally equivalent, declining to draw the sharp distinction New York law imposes. The Delaware Chancery Court's decision in Akorn, Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300 (Del. Ch. 2018), reinforced this approach: the court analyzed effort obligations in the merger agreement but treated the various formulations as requiring the same basic test — what would a commercially reasonable party in that position have done?

The governing law clause in your contract determines which standard a court will apply. If you're drafting an independent contractor agreement without a governing law clause and a dispute arises, you may face a threshold choice-of-law fight before the court even gets to what "best efforts" means. Adding a governing law clause and defining the effort standard in the same agreement eliminates both layers of uncertainty.

UCC Section 2-306 and the Exclusive Dealing Trap

If your contract involves the sale of goods and creates any kind of exclusive arrangement, UCC § 2-306(2) fills in a best-efforts obligation by operation of law — whether or not the word "efforts" appears anywhere in the document. The official comment to § 2-306 states plainly that the obligation "may be found even though no express provision is made." Courts have applied this broadly.

In Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Publishing Co., 330 N.Y.S.2d 329 (N.Y. App. Div. 1972), a publisher that held exclusive rights to an author's works was found to have breached an implied best-efforts duty when it developed competing books that predictably cannibalized sales of the plaintiff's titles. The contract said nothing about "best efforts." The exclusive dealing structure was enough to imply the duty. The publisher's intentional diversion of resources away from the obligated product line was treated as a breach.

The practical scope of § 2-306(2) is broader than most small business owners realize. It covers manufacturer-distributor relationships, exclusive territory licensing arrangements, and supply agreements where one party is the sole source of a product. If your distribution deal or supply arrangement creates exclusivity — even as a side effect of territory restrictions — you should assume a best-efforts obligation exists unless you explicitly address it in the agreement. An online generator or a boilerplate template-based agreement will not catch this automatically; it requires deliberate attention to the exclusivity structure and a conscious decision about what standard should govern, or whether the implied duty should be disclaimed entirely.

A clean statement of work that specifically defines the obligations and their associated effort standards — rather than relying on generic boilerplate — is one of the most effective ways to avoid the § 2-306(2) implied duty trap in ongoing service-and-supply relationships.

The Mixing Problem: When One Contract Uses Multiple Standards

One of the most common — and hardest to catch — drafting problems is using different effort standards in different sections of the same contract. A web development agreement might require the developer to use "best efforts" to meet sprint deadlines but "commercially reasonable efforts" to fix post-launch defects. A consulting contract might require the consultant to use "best efforts" on the primary deliverable but "reasonable efforts" to maintain confidentiality. These inconsistencies create two seperate problems.

First, courts interpreting a contract that uses different effort phrases in different sections will typically presume the parties intended different standards — which means you may be held to the demanding Bloor standard for obligations where "best efforts" appears, and to the more lenient business-judgment standard for obligations where "commercially reasonable efforts" appears. That may produce surprising asymmetries: a minor milestone governed by "best efforts" could generate more liability exposure than a core deliverable governed by "commercially reasonable efforts."

Second, the inconsistency is almost always unintentional. It results from combining sections from different template sources, or from redlines where the parties negotiated one clause and left others untouched. Nobody notices during the review because the effort standard isn't what the negotiation is about — until a dispute arises and someone pulls out a highlighter.

The fix takes about five minutes. After you draft or finalize any commercial agreement, run a keyword search for "best efforts," "reasonable efforts," "commercially reasonable efforts," "diligent efforts," and just "efforts" standing alone. Review every instance. If you find multiple standards in the same agreement without a deliberate reason for the variation, standardize them. You can find a full catalog of professional-grade contract templates, including ones with consistent effort-standard language, at the templates library.

Defining the Standard in the Contract Itself

The cleanest solution to effort-standard uncertainty is to define the phrase in your contract's definitions section. Courts in every commercial jurisdiction will honor a clear, internally consistent definition. It removes the guesswork, it sets expectations for both parties at signing, and it gives the factfinder a concrete test to apply if the obligation is ever disputed.

Here's a sample definition you can adapt for "Commercially Reasonable Efforts" — the standard most appropriate for general commercial performance obligations:

"'Commercially Reasonable Efforts' means the efforts and resources that a reasonably prudent business entity of similar size and capability, operating in the same industry, would devote to a comparable objective under similar circumstances, taking into account the commercial reasonableness of the required actions, the resources available to the obligated party, the probability of achieving the desired outcome, and the economic impact of the required steps. 'Commercially Reasonable Efforts' does not require a party to take any action that would have a material adverse financial impact on its overall business operations."

And here is a definition appropriate when you actually want the more demanding standard — for example, for a regulatory-approval obligation in a transaction where the approval is a genuine condition precedent:

"'Best Efforts' means that the obligated party shall take all reasonable steps within its control and devote all resources reasonably necessary to accomplish the stated objective, including pursuing all available alternatives when a primary approach fails, and shall not allow its own convenience, cost preferences, or unrelated business priorities to reduce the priority given to the contractual obligation. The obligated party's duty to use Best Efforts does not require it to take any action that would be financially catastrophic to its ongoing business, as determined by reference to the financial impact on operations as a whole."

Notice what both definitions share: they give a court specific factors to apply rather than an open-ended inquiry. They also communicate to the other party, at signing, exactly how hard each side is promising to try. That transparency is commercially valuable — it prevents the "I thought you were committing to more than that" fight that leads to disputes in the first place. When you create a contract from scratch, or adapt one from a template or generator, adding a definitions section that addresses effort standards is a small investment with a disproportionately large payoff.

Sample Clause Language for Each Effort Level

The following ready-to-use language can be inserted into your contracts, organized by effort standard. Each version includes the defined-term approach described above, which courts consistently enforce in commercial disputes between sophisticated parties.

For Commercially Reasonable Efforts (most commercial performance obligations):

"Each party shall use Commercially Reasonable Efforts to perform its obligations under this Agreement. 'Commercially Reasonable Efforts' means the efforts and resources that would be devoted to a matter by a reasonably prudent business entity with similar capabilities and commercial objectives, taking into account cost constraints, the probability of success, and the economic reasonableness of the required actions. Commercially Reasonable Efforts shall not require either party to take actions that would result in a material adverse impact on its overall business operations or financial condition."

For Reasonable Efforts (general performance where you want a contextual standard):
"Contractor shall use Reasonable Efforts to meet each Project Milestone identified in the attached Statement of Work. 'Reasonable Efforts' shall be measured by reference to industry-standard practices for projects of comparable scope and complexity, taking into account the resources available to Contractor and the commercial objectives of both parties as discussed during the proposal phase."

For Best Efforts (high-stakes, specific obligations like regulatory approvals):
"Seller shall use Best Efforts to obtain all governmental approvals required to commence operations under this Agreement, including submitting all required filings within ten (10) business days of execution and responding promptly to agency requests for supplemental information. For purposes of this Section, 'Best Efforts' does not require Seller to take any action that would be financially catastrophic to its overall operations, as defined in the definitions section of this Agreement."

A few things to notice about the Best Efforts sample: the standard is applied to a narrow, specific obligation (getting a regulatory approval), not to general performance. The definition includes an explicit financial-catastrophe carve-out. And there is a specific performance obligation (file within ten days, respond promptly) so that compliance is measurable rather than open-ended. These are the features that make best-efforts clauses defensible — and the absence of these features is what makes generic "best efforts" language in a boilerplate draft so dangerous.

When you draft a service contract or consulting agreement, consider adding a "Standard of Effort" section that sets a single, defined standard for all obligations in the agreement. This section should:

• Define the standard in plain language, including the specific factors a court should use
• Apply the definition expressly to all effort-based obligations in the agreement, unless a different standard is explicitly called out for a specific provision
• Include a financial-catastrophe carve-out if the standard is "best efforts"
• Cross-reference the governing law clause to anchor interpretation in the chosen jurisdiction

Final Checklist Before You Sign or Send

Before you finalize any commercial agreement that contains an effort standard, work through this list. The whole exercise takes about ten minutes and will catch every significant effort-clause problem before it becomes a dispute:

• Find every effort clause: run a keyword search for "efforts," "diligent," "endeavors," and "attempt" across the entire document.
• Confirm consistency: are you using one standard throughout, or multiple standards without a deliberate reason? If the latter, standardize.
• Check the governing law clause: your contract should have one; it determines how the effort standard will be interpreted.
• Look for exclusivity language: any exclusive dealing arrangement may trigger a UCC § 2-306(2) implied best-efforts duty for goods contracts. Address it explicitly.
• Add a definition: if the effort standard is not defined in the definitions section, add one. Use the sample language above as a starting point and adapt it to the specific obligation.
• Consider the documentation burden: if you are agreeing to "best efforts," you are also agreeing to document your performance. Build that paper trail from day one.
• Apply "best efforts" narrowly: reserve the demanding standard for specific, high-stakes obligations — regulatory approvals, exclusivity promotion duties, financing conditions — and use "commercially reasonable efforts" for general performance.

Effort standard clauses are one of the places where a two-word choice in a template carries a multi-year legal consequence. Courts do not re-write effort clauses to match what the parties probably intended; they enforce what the document says, interpreted through the lens of whatever jurisdiction governs. Take the fifteen minutes to get this right before the contract is signed, and you will not have to spend the fifteen months dealing with what happens when you don't.

Article reviewed by: Sylvia M. (Attorney)