Conditions, reasonable efforts and good faith

Most conditions require that a party undertakes to achieve a certain fact or event: that’s what the condition is about or what is implied by a condition. The triggering event must be achieved or, conversely, a party should avoid that it’s satisfied. This blog is about conditions and the vague principles that govern such conditions.

Most conditions require that one party undertakes to achieve a certain fact or event. This would imply that that party also has the power to prevent the satisfaction of a condition. That’s is not true: European legal systems impose the principle of good faith (or a similar concept – e.g., not to abuse a right) on such party requiring it to make reasonable endeavours in achieving the stipulated results. The specific effects of this general principle and the particular actions required in the context largely depend on the circumstances of the case. It is clear, however, that a party cannot sit and await the lapse of time: a condition that was dependent upon the efforts made by the party that is entitled to invoke it, is valid and enforceable only if that party is able to show that it has done what could reasonably be expected from it to have that condition satisfied.
Because by its nature the principle of good faith depends on the particularities of the case, it is not always possible to foresee what level of efforts actually is required. This does not take away that the parties may well be able to prescribe what minimum level of efforts is expected or which specific actions must be undertaken by a party in order to allow it to invoke the condition. Therefore, a generic contract clause providing that the parties will make best efforts to have the conditions satisfied (within an agreed period of time) is as such redundant: it does not add anything to what the law imposes. This is different if the parties also provide what such ‘best efforts’ means or if they prescribe the contents and any monetary implications of any required actions.
Note that reasonable efforts to have a condition satisfied is something else than a condition that reasonable efforts are made to attempt to achieve something. Compare the following two examples:

This Agreement is conditional upon Employee having made reasonable endeavours to obtain a waiver from his current employer regarding the non-compete obligation in their employment agreement.

This Agreement is conditional upon Employee having obtained a waiver from his current employer regarding the non-compete obligation in their employment agreement. Employee shall make reasonable endeavours to obtain such consent as soon as practicable.

In the first example, the condition would be satisfied if the employee has made several serious requests even if they were rejected, whereas in the second example, the condition is not satisfied until the waiver is actually obtained.

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