juin 5. 2020

"Best Efforts" as a term in the contract: the latest case

Sutter Hill Management Corporation v Mpire Capital Corporation, 2020 BCSC 238 (CanLII)


Sutter Hill Management Corporation v. Mpire Capital 2020 BCSC 238

There is a theoretical difference between ‘best efforts’ and what is ‘commercially reasonable’. (para 51). ‘Commercially reasonable efforts’ is a lower standard of effort than ‘best efforts’. (para 56)

In a case where a buyer of a nursing home is required to take 'commercially reasonable best efforts' to secure regulatory approval of its operation of the nursing home, ‘best efforts’ in this phrase has been determined to be redundant. The buyer was held to commercially reasonable steps.

In the separate analysis of what a ‘best efforts’ requirement would entail, the court described the requirement as ‘leaving no stone unturned’ (para 48, 54). Another description is that the best efforts party must subordinate its own economic interest to the other party’s (para 48).

Bobbiduncan Holdings Ltd. v. Pawelek 2007 BCCA 312

When a contract party mitigating breach of contract seeks out and finds what seems to be the best price for an abandoned leasehold, has the mitigating party met their written contractual requirement to use ‘best efforts’ to mitigate damages?

The obvious answer is yes. The case is only cited because the breaching party tried to define ‘best efforts’ to be a higher standard than merely that the mitigating party obtain the fair market value of the leasehold under distressed circumstances.

Fantl v. Transamerica Life Canada, 2013 ONSC 2298

When an investment information sheet promises ‘best efforts’ to mimic the S&P500 total return index but only does so in an information pamphlet rather than in the investment contract itself, Perell J held that whereas the information pamphlet was not necessary to the written contract, the information pamphlet terms could not be implied into the contract. (para 147).

My editorial note: In articulating what is wrong with the SCC imposition of ‘good faith’ as an implied term in contract, no better critique can be found than Perell’s rejection of the ‘best efforts’ information pamphlet as an implied part of the formal written contract. (para 140-147).

'Best efforts', which every lawyers knows from doing undertakings, is akin to Cromwell's imposition of 'good faith' as an implied term in contract. 'Best efforts' was one of the categories that pre-Bhasin academics used to analogize a 'good faith' implied contractual requirement. (see McManus: The Law of Contract (2d) p.840).

Whereas practicing lawyers all know how onerous 'best efforts' in undertakings are, and so we are very resistant to taking on such obligations, academics, and SCC judges, seem at ease with imposing unwritten and radically indeterminate language as an implied term.

Despite Cromwell's assertion in Bhasin, that 'honesty' is easily understood (para 80), the indeterminate story of 'best efforts' (a term that is not implied but written), demonstrates what everyone except SCC judges already knows: The imposition of an implied 'good faith' term into every contract could have any effect from no extra obligation, up to the obligation that the required party subordinate their own economic interest to that of the other party - all arising from an unwritten 'good faith' requirement.