What is it?
Clause Type | Governs performance obligations in contracts that lack precise action steps or explicit remedies for failure to perform.
reasonable efforts
Contract LawLegal glossary term
Quick answer
What does reasonable efforts mean?
Reasonable efforts usually mean taking prudent steps and exercising due diligence to achieve a stated goal. In contracts, it matters because parties often disagree over how much time or money should be spent mitigating risk. Before signing, check if the contract defines specific actions or resource limitations.
Definitions
What is reasonable efforts?
Legal Definition
Reasonable efforts describes a contractual obligation requiring one party to act prudently and exercise due diligence in achieving a goal or mitigating risk. It mandates an action standard that falls below the level of 'best efforts' but above simple inaction, establishing specific duties for performance. Courts assess this standard based on industry practices and the commercial context of the agreement.
Plain-English Translation
If your parent promises to help you study, reasonable effort means showing up and doing homework, not just looking at the textbook. It’s like agreeing to walk to the corner store when it's only a short distance away.
Term context
How reasonable efforts shows up in legal documents
Why does it matter?
Failure to meet reasonable efforts can constitute a breach of contract, potentially leading the non-breaching party to seek damages. The party who fails to take adequate action bears the risk of financial loss or inability to complete the transaction.
When does it matter?
This standard is triggered when an agreement requires one party to secure financing, obtain permits, or negotiate a sale within defined contractual timelines. It applies from the moment the obligation begins until the specific goal must be met.
Where is it usually seen?
It appears frequently in commercial agreements like joint venture contracts, real estate purchase and sale agreements, and merger integration documents.
Who is affected?
A borrower owes reasonable efforts to a lender when seeking collateral or guaranteeing debt. A tenant owes reasonable efforts to a property owner by maintaining common areas and mitigating damage.
How does it work?
First, the contracting parties must clearly define what constitutes success under the agreement's scope. Then, the obligated party must take all actions that a prudent professional in that industry would undertake under similar circumstances. Finally, courts will review whether those steps were both necessary and commercially viable.
Contract relevance
Why reasonable efforts matters in contracts
Failure to meet reasonable efforts can constitute a breach of contract, potentially leading the non-breaching party to seek damages. The party who fails to take adequate action bears the risk of financial loss or inability to complete the transaction.
Document context
Where reasonable efforts appears in documents
| Document type | Section | Why it matters |
|---|---|---|
| Merger & Acquisition Agreements | Closing Conditions/Representations | It governs required steps to complete a deal, such as securing necessary governmental approvals. |
| Joint Venture Agreements | Operational Milestones | This standard dictates how actively partners must work together to reach shared business objectives. |
| Commercial Licensing Agreements | Compliance/Marketing Efforts | It defines the minimum level of effort required by a licensee or distributor to maintain market presence. |
| Real Estate Development Contracts | Permitting and Zoning | The standard dictates how diligently developers must pursue necessary governmental approvals and zoning changes. |
Contract language
Common contract wording
| Contract wording | Plain-English meaning | What to check |
|---|---|---|
| Party A shall use reasonable efforts to secure financing. | Party A must act responsibly and take sensible steps, but they are not guaranteeing success or unlimited resources. | Does the contract specify what 'responsible' means in this industry (e.g., contacting specific banks)? |
| The Buyer will use reasonable efforts to close this transaction. | Buyer must actively pursue closing the deal, but they can walk away if the costs become excessive or unreasonable. | Does the contract set a clear deadline for these 'reasonable' actions? |
| We require reasonable efforts to comply with all local laws. | You must make every sensible effort to follow the law, but you are not responsible if an unforeseen legal hurdle arises. | Is there a carve-out for 'force majeure' events that make compliance impossible? |
Red flags
Red flags to watch for
The use of 'reasonable efforts' without any definitions.
This vagueness allows each party to interpret the required diligence differently, leading to costly litigation.
What to check: Demand that specific measurable actions or resources are attached as an exhibit.
Opposing parties rely on this term in different sections of the contract.
If 'reasonable efforts' means one thing regarding compliance and another regarding marketing, the entire agreement is contradictory.
What to check: Ensure the definition of 'reasonable efforts' applies uniformly across all related obligations.
The contract requires reasonable efforts but fails to define the scope or budget.
Without a defined scope, one party can claim they exhausted their 'reasonable' resources even if those resources are merely minimal.
What to check: Confirm that limitations on spending (e.g., 'at no cost to the other party') are included.
The term is used in a clause governed by different state laws.
Different jurisdictions interpret contractual duties and diligence standards differently, creating legal uncertainty.
What to check: Confirm the governing law section addresses performance standards explicitly.
Wording examples
Clearer wording examples
Vague wording
Use reasonable efforts to secure permits.
Clearer wording
Submit all required applications within 30 days and attend at least three scheduled municipal planning meetings.
Vague wording
Exercise reasonable best practices regarding data privacy.
Clearer wording
Adhere strictly to industry standards like ISO 27001 and retain an annual audit report demonstrating compliance.
Note: “clearer” means easier to read — not legally reviewed or guaranteed safe.
Pre-signature checklist
What to check before signing
1
Define 'reasonable efforts' in a dedicated Definitions section.
2
Specify the required actions (e.g., submitting specific forms, contacting named officials).
3
Establish clear timeframes or deadlines for the performance of these efforts.
4
Determine if financial costs are limited (i.e., must be incurred at no cost to you).
5
Confirm what constitutes an 'unforeseeable' barrier that excuses the effort requirement.
6
Ensure the standard does not conflict with other stated obligations in the contract.
Party impact
How reasonable efforts affects each party
| Party | What this party should check |
|---|---|
| The Obligor (Party promising action) | Verify that the definition of 'reasonable' is limited to measurable actions, preventing open-ended duties. |
| The Beneficiary (Party relying on action) | Ensure there are clear remedies if the other party fails to meet this standard of diligence. |
Comparison
reasonable efforts vs similar terms
| Related term | Plain meaning | Main difference from reasonable efforts |
|---|---|---|
| Best Efforts | Requires a party to use all reasonable means, often involving significant financial commitment, to achieve a goal. | Best efforts is much higher than reasonable efforts; it implies foregoing other profitable opportunities. |
| Commercially Reasonable Efforts | A standard rooted in market practice, requiring actions that a typical business owner would take under similar circumstances. | Focuses more on industry norms and practical commercial viability rather than just general prudence. |
| Due Diligence | A specific investigation or audit performed to assess risk, usually before a major transaction. | Diligence is the process of gathering information; reasonable efforts are the subsequent actions taken based on that information. |
Missing or vague
If reasonable efforts is missing or vague
If you do not define this standard, disputes will inevitably arise over intent and scope. Litigation often revolves around whether a party took 'enough' steps—a subjective measure difficult to prove in court. Opposing counsel can exploit the vagueness, arguing that any minor failure constitutes a breach of contractual duty. Defining it provides a measurable baseline for performance expectations.
Document map
Document section map
| Contract section | What to inspect |
|---|---|
| Definitions | The ideal place to define 'reasonable efforts' by listing specific, agreed-upon actions. |
| Representations and Warranties | Check if any promises made about the state of affairs are contingent on a 'reasonable effort' clause. |
| Conditions Precedent to Closing | This is where the standard most often appears, detailing necessary actions before the deal can finalize. |
Visual model
Understand reasonable efforts fast
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01
A lender requires reasonable efforts from a borrower to secure an appraisal on needed collateral; failure means the loan agreement may lapse.
02
A franchisor demands reasonable efforts from a franchisee to market the location; insufficient marketing activity can lead to termination of the franchise rights.
03
A development company must exercise reasonable efforts to obtain zoning permits before construction begins; delays due to poor effort expose the company to project financing default.
Questions & answers
Common questions about reasonable efforts
What does reasonable efforts mean?
Reasonable efforts usually mean taking prudent steps and exercising due diligence to achieve a stated goal. In contracts, it matters because parties often disagree over how much time or money should be spent mitigating risk. Before signing, check if the contract defines specific actions or resource limitations.
What is reasonable efforts in plain English?
If your parent promises to help you study, reasonable effort means showing up and doing homework, not just looking at the textbook. It’s like agreeing to walk to the corner store when it's only a short distance away.
Why does reasonable efforts matter in a contract?
Failure to meet reasonable efforts can constitute a breach of contract, potentially leading the non-breaching party to seek damages. The party who fails to take adequate action bears the risk of financial loss or inability to complete the transaction.
When does reasonable efforts apply?
This standard is triggered when an agreement requires one party to secure financing, obtain permits, or negotiate a sale within defined contractual timelines. It applies from the moment the obligation begins until the specific goal must be met.
Where does reasonable efforts appear in documents?
It appears frequently in commercial agreements like joint venture contracts, real estate purchase and sale agreements, and merger integration documents.
Who is affected by reasonable efforts?
A borrower owes reasonable efforts to a lender when seeking collateral or guaranteeing debt. A tenant owes reasonable efforts to a property owner by maintaining common areas and mitigating damage.
How does reasonable efforts work?
First, the contracting parties must clearly define what constitutes success under the agreement's scope. Then, the obligated party must take all actions that a prudent professional in that industry would undertake under similar circumstances. Finally, courts will review whether those steps were both necessary and commercially viable.
What happens if reasonable efforts is missing or vague?
If you do not define this standard, disputes will inevitably arise over intent and scope. Litigation often revolves around whether a party took 'enough' steps—a subjective measure difficult to prove in court. Opposing counsel can exploit the vagueness, arguing that any minor failure constitutes a breach of contractual duty. Defining it provides a measurable baseline for performance expectations.
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Glossarycommercially reasonablecommercially reasonable often shapes similar contract language wording, negotiation leverage, and the plain-English meaning of the...Glossarydue diligencedue diligence often shapes similar contract language wording, negotiation leverage, and the plain-English meaning of the clause aro...Glossarymaterial breachmaterial breach often shapes similar contract language wording, negotiation leverage, and the plain-English meaning of the clause a...
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Source & disclosure
This page is an AI-assisted plain-English explanation based on LexPredict Legal Dictionary context and contract-review patterns. It is not legal advice. Meaning may vary by jurisdiction, industry, and exact clause wording.
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