Legal Updates

An obligation to develop an innovative product is not necessarily a best-efforts obligation

June 4, 2025
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A manufacturer agreed in an agreement to deliver an innovative machine but failed to fulfill its obligation.

The Court held that the project's innovation does not exempt the manufacturer from its duty to deliver the product. A best-efforts obligation is essentially behavioral -it includes the duty to act professionally, skillfully, and diligently to achieve the desired outcome, but does not guarantee that outcome. By contrast, an obligation of result concerns the achievement of a specific, contractually defined outcome. The distinction between the two depends on the construction of the contract. Where the agreement includes a clearly defined result, timelines, and consideration, it is deemed an obligation of the result. In this case, the contract language showed that the manufacturer believed it could produce the machine - despite its novelty -and undertook to do so. Therefore, the innovative nature of the machine does not relieve the manufacturer from its obligation to achieve the agreed result.

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