Good Faith Efforts - Contract language
In yesterday’s column, I discussed the impact of revising the following contract clause with a “reasonable efforts” qualifier.
“The Manufacturer shall deliver to the Company the Prototype no later than June 30, 2009.”
Once again, as revised…
“The Manufacturer shall use reasonable efforts to deliver to the Company the Prototype no later than June 30, 2009.”
Today, let’s take a look at what happens if the Manufacturer successfully negotiates to insert a “good faith efforts” qualifier instead.
“The Manufacturer shall use good faith efforts to deliver to the Company the Prototype no later than June 30, 2009.”
This is a dream come true for the Manufacturer because all it has to do to fulfill its obligations is to make an honest attempt to meet the deadline. That’s it. It doesn’t matter if a reasonable person under similar circumstances would have taken a couple of extra steps to try to meet the deadline. As usual, no language, no matter how one-sided, is a vaccine against costly litigation – in a contract dispute, the Company will likely try to couch the facts in a way to show that the Manufacturer did not, in fact, exercise good faith efforts.It’s a good idea for a contract obligee* to reject any attempt by the contract obligor* to weaken the obligor’s obligations with a good faith efforts qualifier, especially if the obligation is important or key to the transaction. This is common sense. An obvious example… a manufacturer shouldn’t grant exclusive distribution rights to a distributor who won’t agree to exercise anything more than good faith efforts to meet minimum purchase targets.
In my next column, I’ll discuss the “best efforts” qualification.* In contract parlance, the obligor is the party with the duty to perform. The obligee is the party with the right to receive performance.
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