May 27, 2015 Articles

Contracts Requiring "Best Efforts" and "Commercially Reasonable Efforts"

Exploring how such contracts are treated in Texas and other jurisdictions.

By Will Taylor, Laurens Wilkes, Joshua Fuchs, Basheer Ghorayeb, and Roy Powell – May 27, 2015

With low oil prices persisting, companies are aggressively searching for ways to reduce capital expenditures. Consequently, companies are examining their contracts and attempting to determine whether canceling or postponing capital projects is possible. In doing this analysis, companies often find that their capital project obligations are tied to the meaning of terms like “best efforts,” “commercially reasonable efforts,” or some other similar standard. However, it is not clear what these terms mean, how courts will interpret them, or how courts will enforce them. While courts tend to recognize the enforceability of these provisions, the guidance is sparse and often presented as a fact question for a jury or judge to determine at trial.

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