Best Efforts vs Reasonable Efforts in NZ Contracts: Commercially Reasonable Efforts

This article is general information only and is not legal advice. Efforts clauses are interpreted case-by-case, so get advice on your specific contract and circumstances.

If you’ve ever negotiated a supply deal, a tech build, a distribution arrangement, or even a business sale, you’ve probably seen an “efforts clause”. It’s the part of the contract that says someone must use “best efforts”, “reasonable efforts”, or the one that causes the most head-scratching: commercially reasonable efforts.

These phrases can look harmless, but they often decide who wears the cost when something gets hard, expensive, or inconvenient. And for small businesses, that can be the difference between a workable commercial relationship and a dispute that drags on (and drains cash) for months.

Below, we’ll break down what commercially reasonable efforts typically means in NZ contracts, how it compares to “reasonable efforts” and “best efforts”, and how you can draft it in a way that actually protects your business (instead of creating a vague promise you can’t measure or enforce).

What Is An “Efforts Clause” And Why Do They Matter?

An efforts clause is a contract term that sets the standard of performance someone must meet when they’re trying to achieve an outcome.

In real life, many outcomes aren’t fully within one party’s control. For example:

• a buyer must obtain finance or regulatory approval;
• a supplier must source stock during a shortage;
• a software developer must integrate with a third-party platform;
• a franchisor must find a location and secure a lease;
• a business must transition customers after an acquisition.

Rather than promising a guaranteed result, the contract often requires the party to try hard enough - but “hard enough” is exactly where the arguments start.

Efforts language matters because it affects:

• Risk allocation (who carries the downside if it becomes difficult or expensive);
• Termination rights (whether a party can exit if the outcome isn’t achieved);
• Dispute outcomes (whether a court or arbitrator thinks a party did enough);
• Day-to-day decision making (what your team must actually do in practice).

And because efforts clauses can be vague, they’re also a common “grey area” where one party expects maximum hustle and the other party expects a more modest, cost-controlled approach.

As a starting point, it helps to remember: your contract only protects you if it’s clear enough to be enforceable. That includes getting the fundamentals right, like what makes a contract legally binding in the first place.

Best Efforts vs Reasonable Efforts vs Commercially Reasonable Efforts: What’s The Difference?

There’s no single “official” definition that applies to every contract. In NZ, these phrases are interpreted in context - including what the contract says as a whole, what the parties were trying to achieve, and what makes commercial sense.

Also, while people often talk about these terms as if there’s a strict hierarchy (reasonable < commercially reasonable < best), that won’t always be the case in every dispute. The wording of the clause and the surrounding contract usually matter more than the label.

Still, in plain English, here’s how these standards are commonly understood in business contracts.

1) “Reasonable Efforts”

Reasonable efforts generally means taking sensible steps that a reasonable person (or reasonable business) would take in the same situation.

It usually doesn’t require a party to:

• incur significant losses,
• risk serious damage to their business, or
• prioritise the contract outcome over their own legitimate commercial interests.

For many small businesses, “reasonable efforts” can be a comfortable standard - but it can also be too soft if the other party is relying on you to push through real obstacles.

2) “Best Efforts”

Best efforts is often treated as a higher standard than reasonable efforts. It suggests a party must take all reasonable steps to achieve the outcome, and may need to be more persistent and proactive.

That said, “best efforts” still isn’t usually interpreted as “do absolutely anything, regardless of cost”. Courts typically avoid interpreting commercial contracts in a way that is absurd or commercially impossible - but “best efforts” can still expose you to a higher compliance burden.

As a business owner, you should treat “best efforts” as: if there’s a reasonable step you could take, you’re probably expected to take it, and you’ll need good evidence of what you tried.

3) “Commercially Reasonable Efforts”

Commercially reasonable efforts is often used as a middle ground. It’s a standard that says: “try hard, but in a way that’s commercially sensible”.

In practice, commercially reasonable efforts usually asks:

• What would a reasonable business do in this industry?
• What steps make sense given the contract value and the likely benefit?
• What level of cost and time is proportionate?
• What risks would a prudent operator accept (and which ones are too extreme)?

This standard is popular because it sounds practical - but it can still be vague unless you define it. Two businesses can have totally different views on what is “commercially reasonable”, especially if one is a startup watching cashflow and the other is a larger organisation with deeper resources.

A Quick Comparison (At A Practical Level)

• Reasonable efforts: sensible steps, not overly burdensome.
• Commercially reasonable efforts: sensible and proportionate steps, viewed through a business lens (industry practice, cost/benefit, risk).
• Best efforts: a higher level of persistence and action, potentially closer to “all reasonable steps” (and harder to defend if you stop early).

If you’re not sure what you’ve actually agreed to, that’s a red flag. It’s usually cheaper to clarify an efforts clause before signing than to fight about it later.

What Does “Commercially Reasonable Efforts” Mean In NZ Contracts (In Real Terms)?

Because “commercially reasonable efforts” doesn’t have a fixed statutory definition, the safest way to think about it is as a context-driven standard.

When a dispute happens, the question typically becomes: Did you do what a reasonable business would do, acting in its commercial interests, to try to achieve the outcome?

Here are the factors that often shape what counts as commercially reasonable efforts in an NZ business contract.

1) The Contract’s Purpose And The Bargain You Struck

If the whole deal depends on one party achieving something (for example, securing a key consent, signing a major customer, or delivering a core system), then “commercially reasonable efforts” may require more active steps than if the obligation is more peripheral.

This is why it’s important your agreement clearly states the intended outcome and timeline, whether it sits inside a broader Service Agreement or another commercial arrangement.

2) Industry Practice And What’s “Normal” In That Market

“Commercially reasonable” often implies “consistent with what businesses in this space typically do”.

For example, in a logistics contract, it may be commercially reasonable to reroute shipments or use alternative carriers. In a specialised manufacturing contract, it may be commercially reasonable to source substitute inputs - but only if they meet specification and don’t breach regulations or warranties.

3) Proportionality: Cost, Time, And Likely Benefit

One of the key reasons parties choose the phrase “commercially reasonable efforts” is to avoid an obligation to spend unlimited money for a small upside.

So a proportionality assessment may look like:

• How much would the step cost?
• How likely is it to work?
• How much revenue (or value) is at stake?
• Would the step cause a material loss?

For small businesses, this is a big deal - you want your contract to reflect the reality that resources are finite, and that sometimes there’s a sensible limit to how far you can push.

4) Good Faith And Genuine Attempts (Not Box-Ticking)

Even with the word “commercially” in there, you generally can’t treat this as a loophole to do the bare minimum. If your actions look like delay tactics, or you didn’t actually try options that were realistically available, you may struggle to prove you met the standard.

In other words: commercially reasonable efforts usually means a genuine attempt, backed by reasonable decision-making, not just a paper trail.

5) Whether You Had To Sacrifice Your Own Business Interests

Commercially reasonable efforts typically allows you to consider your own commercial position. But it doesn’t automatically excuse you from taking any step that is inconvenient or costly.

This is where many disputes sit: one party says “it would’ve cost us too much”, and the other says “that’s what you signed up for”. Clear drafting (and clear evidence of your decision-making) is what reduces the risk.

How Do You Draft A “Commercially Reasonable Efforts” Clause So It’s Actually Useful?

Here’s the honest issue: if your contract just says “Party A must use commercially reasonable efforts to achieve X”, you may still end up arguing later about what that meant.

If you want the clause to protect your business, aim to define the standard in a way that’s measurable and practical.

1) Define The Outcome And The Deadline

Start by being specific about what “success” looks like, and when it must happen. Vague outcomes create vague obligations.

• Is the outcome “obtain consent” or “submit a complete application and respond to queries”?
• Is the outcome “deliver a product” or “deliver a product that meets an agreed specification”?
• Is the timeframe fixed, or does it move if a third party delays?

In more complex commercial relationships, you might place this detail in a schedule or statement of work within a Master Services Agreement, so you can update deliverables without rewriting the whole contract.

2) List The Minimum Steps Required

This is one of the simplest ways to stop an efforts clause becoming a debate.

For example, “commercially reasonable efforts” could be defined to include steps like:

• contacting at least three alternative suppliers within a certain timeframe;
• submitting an application by a set date and providing requested information within X business days;
• escalating the issue internally to a decision-maker;
• attending a specified number of negotiation meetings;
• proposing reasonable workaround solutions (not just saying “it can’t be done”).

These minimum steps don’t have to be exhaustive. The goal is to set a clear baseline that both parties can recognise.

3) Specify What The Party Is NOT Required To Do

This is where many small businesses can protect themselves.

A well-drafted clause might state that commercially reasonable efforts does not require a party to:

• incur costs above an agreed cap (unless the other party agrees to reimburse),
• litigate (or threaten litigation) against a third party,
• accept material financial loss,
• breach another contract, law, or regulatory obligation,
• materially disrupt its business operations.

This kind of drafting is particularly helpful where your contract already has tight risk allocation provisions like a limitation of liability clause - you don’t want your efforts clause quietly reintroducing big, uncapped obligations through the back door.

4) Build In Cooperation Obligations

Efforts clauses often fail because one party needs information, approvals, or actions from the other party - but the contract doesn’t clearly require cooperation.

Consider adding obligations like:

• the other party must provide relevant information promptly,
• the other party must make personnel available for decisions,
• both parties must meet within a set timeframe to agree a workaround if the original plan becomes impractical.

This turns the clause into a practical process, not a one-sided burden.

5) Decide What Happens If The Outcome Isn’t Achieved

This is the part people skip - and then panic later.

Ask upfront:

• Can either party terminate if the outcome hasn’t happened by a longstop date?
• Does one party pay costs incurred to date?
• Does the agreement automatically extend?
• Is there a renegotiation requirement before termination?

Linking the efforts obligation to clear exit rights can reduce disputes dramatically. If termination is on the table, it’s worth making sure your contract handles it cleanly and consistently with your broader position on terminating a contract.

Common Pitfalls For Small Businesses (And How To Avoid Them)

Even if you understand the idea of commercially reasonable efforts, problems often show up in the detail. Here are the issues we see regularly.

Pitfall 1: Using Multiple Standards In The Same Contract

Some contracts say “best efforts” in one clause, “reasonable efforts” in another, and “commercially reasonable efforts” somewhere else - without explaining why.

That’s a recipe for confusion, especially if the obligations overlap. If you genuinely need different standards, define each one and use them consistently.

Pitfall 2: Treating “Commercially Reasonable” As “Whatever We Feel Like”

This standard still expects real action. If a dispute arises, you may need to show:

• what options were available,
• which options you tried,
• why certain options weren’t commercially reasonable, and
• who made the decision and when.

A quick tip: keep your internal emails/notes tidy and factual. If it ever needs to be explained later, you’ll be glad you documented your reasoning.

Pitfall 3: Letting The Efforts Clause Conflict With Other Terms

Your efforts clause should fit with the rest of the agreement, including:

• scope of work and variations,
• fees and cost responsibility,
• warranties and disclaimers,
• liability caps,
• force majeure provisions.

If you’re unsure whether your agreement is meant to be a deed or a standard contract (and what that changes), it’s worth getting clear on the difference between deed and agreement before you sign something that imposes high effort obligations.

Pitfall 4: Relying On Templates For High-Stakes Deals

Generic templates often include efforts language without industry-specific detail. That can leave you exposed when the deal gets complicated.

For anything material (supply chain, software, licensing, growth partnerships, acquisitions), tailored drafting is usually one of the best investments you can make in your risk management.

Key Takeaways

• Commercially reasonable efforts is a common contract standard in NZ, but it’s context-driven and can still be vague unless you define it.
• Reasonable efforts is generally a lower standard, while best efforts is often treated as higher and can require more persistence and action.
• What counts as commercially reasonable efforts often depends on industry practice, proportionality (cost vs benefit), the purpose of the contract, and whether the steps required make commercial sense.
• The best way to avoid disputes is to draft the clause with measurable expectations, including minimum steps, clear timeframes, and clear boundaries on what is not required.
• Efforts clauses should align with the rest of your contract (scope, costs, liability, termination) so you don’t accidentally create obligations that your business can’t realistically meet.

If you’d like help reviewing or drafting a contract clause that uses commercially reasonable efforts (or negotiating whether it should be “reasonable efforts” or “best efforts”), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.