Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

'Best Efforts' Clauses In Commercial Leases

By Gary M. Rosenberg, Alexander Lycoyannis and Michael A. Pensabene
March 01, 2023

In the wake of the global pandemic which caused widespread unforeseen business interruption, "best efforts" clauses in commercial leases have come under scrutiny. While these clauses are often heavily negotiated, they inherently require a degree of interpretation because they speak to the uncertainty of a party's future performance, which is constrained by variables outside of both parties' control. For example, a restaurant lease may obligate the tenant to use "commercially reasonable efforts" to increase gross sales if they fall below a threshold, where the landlord is receiving a percentage of those revenues; or the restaurant tenant may be required to use "best efforts" to obtain a liquor license by a date certain as a condition for receiving the benefit of rent forgiveness prior to opening.

Undefined terms of art such as "best efforts" are often utilized in commercial leases, but the interpretation of those terms and the enforceability of the clause, when left to the courts, will turn on how the lease is drafted. This article discusses how New York courts interpret and enforce these "efforts" clauses.

Hierarchy of Terms

Three terms of art are most commonly used to qualify a party's "effort" to perform under a lease: "best efforts," "reasonable efforts," and "commercially reasonable efforts." However, New York courts have not interpreted these terms in a rigid or uniform manner, nor have they placed the terms into any sort of hierarchy based on the extent of effort.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.