Best Efforts and Commercially Reasonable Efforts Clauses: How California Courts Read Them

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

When a contract does not define the phrase, a best efforts clause in California requires the diligence of a reasonable person under comparable circumstances. (California Pines Property Owners Assn. v. Pedotti (2012) 206 Cal.App.4th 384, 394-395.) That is a different promise from good faith, and it falls short of a fiduciary's duty. It does not call for every conceivable effort. Weak sales alone do not prove a breach, so the case turns on what the distributor did. Kolmogorov Law, P.C. litigates efforts clauses for suppliers, distributors, licensors, and licensees.

Call (909) 235-6116 or contact us online to discuss a best efforts or reasonable efforts obligation that one side says was not met.

What best efforts means when the contract is silent

For years California courts enforced best efforts clauses without defining them. In 2012 the Court of Appeal supplied a definition. When a contract does not define the phrase, the promisor must use the diligence of a reasonable person under comparable circumstances. (California Pines, supra, 206 Cal.App.4th at pp. 394-395.)

Best efforts does not mean every conceivable effort. It does not require the promisor to ignore its own interests, spend itself into bankruptcy, or incur substantial losses to perform. It requires such efforts as are reasonable in light of the promisor's ability, the means at its disposal, and the other party's justifiable expectations. (Ibid.)

Whether best efforts were used is judged in the circumstances of the particular case and is a question for the trier of fact. The clause must also be reconciled with the rest of the contract where possible.

Best efforts, good faith, fiduciary duty, and reasonable efforts

In California Pines a ranch owner had agreed to use best efforts to keep a reservoir at a stated level. The other party argued that the phrase demanded the efforts of a fiduciary. The court disagreed and affirmed judgment for the ranch owner. A best efforts clause, without more, does not create a fiduciary relationship.

The court also agreed that a promise to use best efforts is different from a promise to act in good faith. It quoted a treatise on the difference. Good faith has honesty and fairness at its core and is imposed on every party to a contract, while best efforts has diligence as its essence. Our page on the implied covenant of good faith covers the first standard.

Contracts also use "reasonable efforts" and "commercially reasonable efforts." California Pines did not define those phrases. What they require in a given contract is a matter of interpretation, and a definition written into the contract controls.

Exclusive dealing in goods: best efforts by statute

Some efforts obligations exist with no clause at all. Under the Commercial Code, a lawful agreement for exclusive dealing in goods imposes two duties unless the parties agree otherwise. The seller must use best efforts to supply the goods. The buyer must use best efforts to promote their sale. (Com. Code, § 2306, subd. (2).)

An exclusive distributor of goods may therefore owe effort even when the contract never mentions it. Our pages on distribution agreement termination, exclusivity clauses, and requirements and output contracts cover the neighboring disputes.

When a court will imply an efforts promise, and when it will not

Outside goods, the question is whether an efforts obligation should be read into a contract that lacks one. Covenants to use good faith or best efforts are routinely implied where a licensor grants exclusive rights in exchange for a share of profits or royalties and the licensee does not expressly promise to do anything. (Third Story Music, Inc. v. Waits (1995) 41 Cal.App.4th 798, 805.)

The same case shows the limit. A company held the rights to an artist's recordings under a contract that let it market them or, at its election, refrain. It also owed guaranteed minimum payments whatever it did. The court refused to imply a duty to market. Courts may not imply a covenant directly at odds with an express grant of discretion. The court described one exception, for the rare case where a literal reading would leave the agreement illusory. (Id. at pp. 807-808.) Here the guaranteed payments supplied the consideration.

For a licensor, the lesson is in the payment terms. A deal paid only by royalties supports an implied efforts duty. A deal with a guaranteed minimum and an express right to do nothing may not. Our page on IP license disputes covers related claims.

Proving a failure of effort

The standard is about conduct, so the proof is about conduct.

What the promisor did: budget, staff assigned, sales calls, marketing, trade shows, samples placed.
What it did for its own or competing products over the same period.
What the contract says about effort: minimum purchases, marketing spend, milestones, launch dates.
Internal messages showing the product was set aside, or why.
What an average, prudent, comparable business in that trade would have done, which may call for an industry witness.

Objective terms such as a minimum purchase requirement or a stated marketing budget give a court something to measure.

Damages are the second hurdle. Contract damages must be clearly ascertainable in both their nature and origin. (Civ. Code, § 3301.) The claimant has to show what reasonable diligence would have produced, a problem discussed on our page about lost profits.

If your business is accused of not trying

Assemble the record of what was done and what it cost. Explain the decisions: market conditions, pricing set by the other side, supply shortages, product defects, a competing launch. The law does not require ruinous spending, so evidence that further effort would have meant substantial losses is relevant. Show where the other party failed to supply, support, or approve what the effort depended on.

If your business was promised the effort

Compare the promise with the performance, month by month. Ask for the marketing plans, budgets, and sales reports the contract entitles you to. Put your concerns in writing while the contract is running. We read the efforts clause together with any termination right, because ending the contract and suing for damages follow different rules.

What to bring to the first meeting

The contract, including any definition of the efforts standard, minimums, budgets, or milestones.
Sales reports, forecasts, and marketing plans exchanged during the term.
Correspondence about performance, complaints, and explanations.
Your estimate of what the product or territory should have produced, and the basis for it.

Frequently asked questions

Our distributor promised best efforts and sold almost nothing. What does best efforts legally require in California?

It requires the diligence a reasonable distributor would use in comparable circumstances, unless your contract defines the term differently. Low sales do not prove a breach alone. You would need evidence of what the distributor did and failed to do, such as staffing, marketing, and attention given to competing lines, measured against what a prudent distributor would have done.

What does commercially reasonable efforts mean?

Its meaning depends on the contract. A California court interprets the phrase like any other term, from the words chosen, the contract as a whole, and any usage that gives the words a special meaning. A definition written into the contract controls. The California decision that defined best efforts did not define this phrase.

Is best efforts the same as good faith?

No. A California appellate court has said the two promises are different. Good faith concerns honesty and fairness and is imposed on every party to a contract. Best efforts concerns diligence, and the treatise the court quoted calls it the more exacting standard. A party can act honestly and still fall short on diligence.

We agreed to use best efforts to sell a product that turned out to be unprofitable. Do we have to keep losing money on it?

Probably not without limit. Under California case law, best efforts does not require a party to ignore its own interests, spend itself into bankruptcy, or incur substantial losses. You must still show reasonable diligence given your means and the other side's justifiable expectations.

Does an exclusive distributor have to use best efforts in California?

For goods, yes, unless the contract says otherwise. California Commercial Code section 2306 provides that a lawful exclusive dealing agreement obligates the buyer to use best efforts to promote the goods and the seller to use best efforts to supply them. The parties may replace that default with their own standard.

Talk to a California breach of contract attorney

If a dispute turns on whether enough effort was made under a distribution, license, or sale agreement, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine, California, that represents companies and their owners in court and in arbitration.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the evidence of effort, and the court.