In determining the extent to which an obligation of a party involves a duty of best efforts in the performance of an activity or a duty to achieve a specific result, regard shall be had, among other factors, to
(a) the way in which the obligation is expressed in the contract;
(b) the contractual price and other terms of the contract;
(c) the degree of risk normally involved in achieving the expected result;
(d) the ability of the other party to influence the performance of the obligation.
1. Criteria for determining the nature of the obligation
It is important to determine whether an obligation involves a duty to achieve a specific result or simply a duty of best efforts, as the obligation is more onerous in the former case. Such a determination may sometimes be difficult. This Article therefore establishes criteria which may offer guidance to parties, judges and arbitrators, although the list is not exhaustive. The problems involved are frequently matters of interpretation.
2. Nature of the obligation as expressed by the contract
The way in which an obligation is expressed in the contract may often be of assistance in determining whether the parties intended to create a duty to achieve a specific result or a duty of best efforts.
1. A, a contractor, agrees to build storage facilities for B, who is most keen that the work be finished in an unusually short time. If A undertakes that “the work will be completed before 31 December”, it assumes an obligation to achieve the specific result of meeting that deadline. If it merely undertakes “to try to complete the work before 31 December”, its obligation involves a duty of best efforts to attempt to meet the deadline, but no guarantee that it will definitely be met (see Article 5.1.5(a)).
3. Price or other terms of the contract
The contractual price or other terms of the contract may also offer clues as to the nature of an obligation. An unusually high price or another particular non-monetary reciprocal obligation may indicate a duty to achieve a specific result in cases where a mere duty of best efforts would normally be assumed. Clauses linking payment of the price to the successful outcome of the operation, penalty clauses applicable if the result is not achieved and hardship clauses enabling a party to adapt the contract if circumstances make it too harsh to perform as initially agreed are other examples of contractual terms which may - in one way or another - assist in determining the nature of the obligation in question (see Article 5.1.5(b)).
4. Degree of risk in performance of an obligation
When a party’s performance of an obligation normally involves a high degree of risk it is generally to be expected that that party does not intend to guarantee a result, and that the other party does not expect such a guarantee. The opposite conclusion will be drawn when the desired result can as a rule be achieved without any special difficulty (see Article 5.1.5(c)).
2. A space agency undertakes to put a telecommunication satellite into orbit, the rate of failure of past launchings having been 22%. The space agency cannot be expected to guarantee that the orbiting will be successful. The obligation is merely to observe the degree of diligence required for such launchings in view of the present state of technology.
3. A promises to deliver 20 tons of steel to B on 30 June. Such a relatively simple operation is subject to no special risk. A is committed to the specific result of delivering the required quantity of steel on the date specified and not merely to attempting to do so.
5. Influence of obligee over performance of an obligation
In some situations one party may have a degree of influence over the performance of the other party’s obligations. This fact may transform into duties of best efforts obligations which might otherwise be characterised as duties to achieve specific results.
4. A is prepared to provide B with the technical assistance necessary to apply a newly discovered chemical process, and it is agreed that B will send some of its engineers to attend training sessions organised by A. A cannot promise that the new process will be mastered by the other party, since that result depends in part on B’s effectively sending its engineers to the training sessions, on those engineers’ competence and on their attentiveness at the sessions (see Article 5.1.5(d)).