Corporate & Securities Law

A Redundancy Found in ?Efforts? Provisions

By Ken Adams

It’s commonplace for a contract to require a party to use efforts (reasonable efforts or some suboptimal variant) to accomplish something to the extent possible (using those words or words to that effect). The notion of to the extent possible is redundant, as it’s implicit in an efforts provision that the party under the obligation may be unable to perform it, even after making the necessary effort.

Here, culled from the SEC’s EDGAR system, are some unprettied-up examples of this phenomenon (the redundant language is in italics):

In the event of force majeure, the affected party shall keep the other party fully informed and shall use its best efforts to comply to the fullest extent possible with its obligations pursuant to this Agreement … .

Make every reasonable effort to cause as little interference with and inconvenience to the business of the other Party as is reasonably possible [read not to interfere with or inconvenience the business of the other Party], subject to such Party’s other obligations under this Agreement and each SOW; 

… then the non-performing, hindered or delayed party will be excused for such non-performance, hindrance or delay, as applicable, of those obligations affected by the Force Majeure Event for as long as such Force Majeure Event continues and such party continues to use its best efforts to recommence performance whenever and to whatever extent possible without delay,

the Borrower shall use its best efforts and good faith to provide the Agent with as accurate information as possible [read accurate information] for such weekly Borrowing Base Certificates.

Motricity will make their best effort to address as many of these bugs as possible [read these bugs] during the 3.0.1 release cycle: …

NPM shall use reasonable efforts to mitigate and cancel, to the extent possible, all obligations that would incur expense … .

But in this context other flavors of possible are unobjectionable if what’s at issue isn’t just whether the task can be accomplished at all; instead, an additional parameter is factored in.

For example, for purposes of an obligation to reduce taxes, it’s not surprising that it isn’t enough that any reduction, no matter how minimal, be achieved?instead, the taxes have to be reduced as much as possible:

The Parties shall exercise their best efforts to ensure that any withholding taxes imposed are reduced as far as possible under the provisions of any relevant tax treaty.

And of course, often a party will want the obligation performed as promptly as possible:

Each of the parties hereto will use its commercially reasonable efforts to satisfy or cause to be satisfied all the conditions precedent which are set forth in Article VII as promptly as reasonably possible … .

The parties shall make a good faith effort to bring the Dispute to an arbitration hearing as expeditiously as possible … .

By the way, if you’re wondering about the distinction between efforts standards, I suggest you consult MSCD or use the search function to search for efforts. In these parts, it’s settled that using anything other than reasonable efforts is counterproductive.

Full post as published by AdamsDrafting on August 06, 2010 (boomark / email).