Reasonable Efforts: The Middle-Ground Standard

What Does "Reasonable Efforts" Mean?

"Reasonable efforts" obligates a party to take steps that a reasonable person or business would take under similar circumstances, considering the burden of those steps relative to the expected benefit. It is a balanced standard that does not require heroic measures.

How Courts Interpret It

Reasonable efforts is measured by an objective standard — not what the obligated party considers reasonable, but what a hypothetical reasonable person in the same position would do. Courts generally consider:

• The costs and resources required to fulfill the obligation
• The likelihood that further efforts would succeed
• The proportionality of the effort to the overall value of the deal
• Industry practices and norms
• Whether the obligated party's own interests conflict with the objective

Reasonable Efforts vs. Other Standards

• Best efforts requires doing everything reasonably possible, even at significant cost. It is the most demanding standard.
• Reasonable efforts requires what a reasonable person would do, balancing costs and benefits. It is the moderate standard.
• Commercially reasonable efforts is similar to reasonable efforts but explicitly applies a business judgment lens.
• Good faith efforts is the lowest standard — requiring honest dealing without active undermining.

In practice, courts in some jurisdictions treat "reasonable efforts" and "commercially reasonable efforts" as functionally equivalent.

Common Uses

• "Seller shall use reasonable efforts to obtain third-party consents prior to closing."
• "Licensee shall use reasonable efforts to commercialize the licensed technology."
• "The parties shall use reasonable efforts to resolve disputes through negotiation before pursuing formal proceedings."

What to Watch For

• Ambiguity invites disputes. Without specific benchmarks, what one party considers "reasonable" may differ dramatically from the other's view. Consider adding measurable milestones.
• Conflicting interests. If the obligated party benefits from not achieving the objective, a reasonable efforts standard may not provide sufficient protection. Consider best efforts or specific performance obligations instead.
• Duration. How long must reasonable efforts continue before the obligation is satisfied? Open-ended efforts standards can create indefinite obligations.

When to Consult a Lawyer

Consider consulting an attorney when the efforts standard in your contract is tied to a critical obligation, such as obtaining regulatory approval or achieving sales targets. The right standard can significantly affect outcomes.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.