Business Law

Business Law News 2017, ISSUE 2

Commercially Reasonable Efforts: A Recent Delaware Supreme Court Holding Might Motivate Contract Drafters to Define the Term for Themselves

D. C. Toedt III

Dell Charles "D. C." Toedt III, a former co-chair of the Commercial Transactions Committee, is an attorney and arbitrator in Houston and a part-time law professor at the University of Houston Law Center, where he teaches contract drafting. He was formerly vice president and general counsel of BindView Corporation, a 500-employee, publicly-traded software company— which as outside counsel he had helped the founders start—until the company’s successful "exit" when it was acquired by Symantec Corporation.

Contract drafters often use the term commercially reasonable efforts in lieu of stating more precise standards of performance. Many clients are drawn to such clauses, which can speed up contract negotiations, even though the vagueness of the term poses a risk of disagreement later. (Clients can sometimes be overconfident that "we’ll just work it out later if the issue ever comes up"— forgetting that the congenial individuals who negotiated the contract might not be in the same jobs later.)

Williams Cos.: "Commercially reasonable efforts" means "all reasonable efforts"

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