Legal Updates

When there is an obligation of “best efforts” and third party’s approvals are required, the best efforts requires not to delay and to promote the approvals

April 17, 2021

As part of a compromise agreement, the owner of a shopping center undertook to act with due diligence, to register the shopping center as a condominium with the Land Registry and to record the ownership of the buyer of two of the stores in his name within 5 years. However, this was not finished within such period.
The Court dismissed the store owner's claim but set deadlines for completion of registration. There are two types of contractual commitments, a "best effort", or a "result", commitment. A "Result" commitment imposes an almost absolute responsibility for achieving the result and can be released from it only in extremely exceptional circumstances of force majeure and obstruction. In contrast, a "best effort" commitment is a commitment to take appropriate measures to achieve the result without committing to achieving it. This commitment imposes on the person who bears it the requirement not to be negligent, which contains within it a duty to act skillfully and with all reasonable means to achieve the agreed contractual goal, but not a commitment to achieve the result. Here, the wording of the agreement established a commitment of due diligence and even specified that the completion of the registration depends on third parties external to the agreement. In such a case, where the approval of third parties is required, the commitment to make a best effort includes an obligation not to delay or prevent a discussion relevant to the fulfillment of the condition, vis-a-vis all the relevant authorities in the matter. Thus, this is an effort commitment which was not breached. However, due to the long lapse of time, the Court set clear dates for the result to be met.