A Best Effort Obligation – The Gap between the Reality and the Desired

A Best Effort Obligation – The Gap between the Reality and the Desired

Yair Aloni, Adv.
July 8, 2021

A landlord undertook to assist the tenant in obtaining a business license but later it became clear that zoning restrictions prevented the receipt of the business license and the tenant sought to be released from the contract. When does a commitment to assist become a commitment to achieve a result and when will liability attach to someone who just did not try hard enough?

Israeli case law recognized a "best effort" obligation, in contras to an obligation to achieve a result, as an obligation to take all reasonable measures for the attainment of a particular goal but without an obligation to achieve it. A best effort obligation usually comes into being when one party needs the assistance of the other in order to accomplish a goal, which is necessary to advance the purpose of the engagement. For example, a property owner may undertake to assist a tenant in the process of changing the zoning plan applicable to the lease or assist in the process of obtaining a business permit or a business partner may undertake to bring customers of a particular type or sector.

Sometimes a gap opens between the actual results and the expectations of a party who relied on the promise to assist to achieve the desired goals. This can lead to legal disputes, especially when it is difficult to prove whether a reasonable effort was made, because in most cases the information about the actions taken, or not, is in the hands of the party who undertook to make the effort.

There are different levels of liability that change from case to case and proper wording of the contract can help define the scope of liability assumed. Thus, for example, a party to a contract who attempts to achieve the result but failed due to incompetence, carelessness or negligence may be considered to have breached the effort obligation. A party who undertakes to "act
to promote" takes on an easier obligation than a party who has undertaken to "take at his own expense all the necessary steps."
In a case decided by the Supreme Court in 2019, the Court held that a company that undertook under a contract for the establishment of a hotel project in Isfiya to act to change the zoning status of real estate breached its obligation to "take all necessary steps." In that case, the entire contract was conditional on the approval of the latest zoning plan attached to the contract and it was not approved due to opposition from the Ministry of Tourism, but the Court found that the company did not make actual attempts to influence the Ministry of Tourism's position or to change the decision.

In another case, heard in 2016, the Magistrate's Court in Rishon Letzion held that business coaches and a company owned by them offered their students to invest funds in a new venture to establish a sales school and breached their obligations regarding marketing of school activities. There was no dispute here that an undertaking was to make reasonable efforts to market the school and cause students to enroll in it, without an undertaking that in practice students would enroll in the school and open courses, is a commitment of best efforts. However, because the marketing activity was limited to only a few Internet publications, it was found that the effort obligation was breached.

Sometimes a party to an agreement may contend that it is a best effort obligation while in practice it is an obligation to a result. For example, in 2019 the Supreme Court rejected a contractor's claim that the registration of the condominium is only an effort obligation and held that even if it were then the non-registration of the condominium for about two decades shows that this obligation was breached.

because the manner in which the contract is drafted is important, it is strongly advised that before a person rushes to undertake to make an effort, such person would seek appropriate legal advice. While negligent wording can impose on a party to a contract a high level of liability without regard to future scenarios that could have been reasonably anticipated and causing a legal accident, an experienced lawyer may help the parties draft a contract that clearly defines the parties' risks and gives detailed expression to each party's obligations while taking into consideration changing scenarios and full transparency.