Drafting Enforceable Commercially Reasonable Efforts Clauses in Business Agreements

Closing Obligations, Earn-Out Agreements, Licensing Agreements, Recent State Cases

A live 90-minute CLE video webinar with interactive Q&A


Tuesday, June 29, 2021

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, June 4, 2021

or call 1-800-926-7926

This CLE webinar will guide counsel in best practices in drafting "best efforts," "commercially best efforts," "commercially reasonable efforts," or some other "efforts" clauses. The panel will discuss the burden of these clauses on businesses, the status of cases recently decided in Delaware, New York, and California, and agreements to examine more closely to avoid these common pitfalls.

Description

The pandemic and related matters upended the business world, imposing challenges and delays on companies and their workforces. Many commercial contracts contain provisions requiring one party to consistently pursue best efforts, commercial best efforts, commercially reasonable efforts, or some other "efforts" qualification. COVID-19's impact highlights the burden of these clauses on businesses trying to meet contractual obligations in a difficult economy.

Both sides of an M&A transaction must use best or commercially reasonable efforts to close a deal. Parties closing during the COVID-19 crisis should actively communicate with each other about their operations as closing approaches. If the COVID crisis places the deal in jeopardy, parties should investigate and document its impact on their ability or obligation to close.

Earn-out transactions oblige an acquirer to operate the acquired company consistent with best or commercially reasonable efforts to protect the seller's earn-out rights. Acquirers should explore and document any strategic changes that might trigger a claim under an efforts clause, including those that are industry-wide or market-based.

Licensing and other commercial agreements often require the developing or commercializing party to continue with commercially reasonable or other efforts. Counsel can track recent development and commercialization efforts of similar products to decide whether a party is using reasonable efforts.

Several states with direct ties to major sales and commercial agreements view these obligations differently. Counsel must understand state obligations that may affect a deal. Delaware courts impose a duty on the party subject to the efforts clause to work with its counterparty to resolve problems. New York, Massachusetts, and California courts focus more on the reasonableness of a party's actions, explicitly acknowledging that a party may consider its own interests in complying with efforts duties.

Listen as our expert panel discusses building "best efforts" clauses in future commercial agreements and handling a default if one arises during the COVID-19 pandemic and beyond.

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Outline

  1. Commercially reasonable efforts
    1. Grounds for delay
      1. Work restrictions
      2. Supply chain interruptions
    2. Provisions
      1. Closing obligations
      2. Interim period operations
      3. Earn-out agreements
    3. Licensing/collaboration agreements
  2. State cases
    1. Delaware
    2. New York
    3. California
    4. Massachusetts

Benefits

The panel will review these and other relevant topics:

  • What is the purpose of the best efforts clause in commercial agreements?
  • What do best efforts mean when preparing for an M&A closing?
  • How do similarly performing businesses in an industry impact the interpretation of best efforts in commercial agreements?
  • What does recent state case law offer regarding enforcing best efforts clauses?

Faculty

Toedt, Dell
D.C. Toedt, III

Attorney
On Contracts

Mr. Toedt's practice focuses on rep­re­sent­ing technology-focused companies. He edits and...  |  Read More

Additional faculty
to be announced.
Attend on June 29

Early Discount (through 06/04/21)

Cannot Attend June 29?

Early Discount (through 06/04/21)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include program handouts.

To find out which recorded format will provide the best CLE option, select your state:

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