As discussed in my post regarding general aspects of conditions, a party who is burdened with the satisfaction of a condition must do so in good faith. This good faith principle implies that such party should make best efforts. I did address the contractual concept of best efforts in a post of March 2009 (click here); but will add a few comments in relation to this best practice rule on drafting conditions.
9) Do not include a best efforts provision in connection with a condition, unless it specifies a required (i.e., a particular or preferred) course of action in a meaningful manner.
In European continental legal systems, the general principle of good faith requires that the parties make best efforts in order to have each condition satisfied in due course. This means that, in connection with the conditions, upon entering into an agreement there is an implicit presumption that all internal approvals required for the consummation of the transaction are obtained as soon as possible after signing of the agreement; that merger filings are made (and all answers to any competition authority’s questions are given) in due course; and that any adverse events are dealt with in such manner that damages are minimised for the purchaser (i.e., between signing and closing, the seller would act in a trustee-like quality vis-à-vis the purchaser).
In a European context, it would be redundant or even exaggerated to provide:
Subject to the terms and conditions in this Agreement, Purchaser and Principal Seller shall, and Principal Seller shall procure that the Company shall, use commercially reasonable efforts to take promptly, or cause to be taken promptly, all actions, and to do promptly, or cause to be done promptly, all things reasonably necessary, proper or advisable under applicable laws and regulations to satisfy the conditions to the other Parties’ obligations to consummate the Acquisition and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement. Each Seller will use its commercially reasonable efforts to cause the other Seller to fulfill such other Seller’s obligations under this Agreement.
If the parties are able to provide how a certain course of action must be undertaken by a party, it makes sense to specify those actions. In such case, the best effort obligation is partly turned into a results-oriented or milestone-driven obligation. For example, a purchaser (who would normally coordinate the preparations of the merger filings) could be obliged to propose antitrust remedies before the appropriateness of such remedies would even be addressed by the competition authorities.
