Contracts frequently describe the degree of effort required by one of the parties to bring about some condition precedent in a contract. The lawyers often quibble over whether the party must exert “reasonable” efforts or “best” efforts. Does the use of “reasonable” or “best” mean anything in the real world? It certainly can under Illinois law.
Mathias and Mary Jane Klemp (“Defendants”) entered into a contract to purchase 15 acres of land for $2.5 million from Hergott Group, Inc (“Plaintiff”). The contract also provided $500,000 of the purchase price was contingent on and was required to be paid only if Defendants obtained a rezoning classification of the land from the City of Highland Park. In the contract, Defendants agreed to use their “best efforts” to obtain the rezoning classification until their zoning request was denied and the decision of the Village of Highland Park became final. If Defendants were unable to obtain the zoning change, their obligation with respect to the $500,000 would be cancelled.
After closing, Defendants applied to the City of Highland Park to change the zoning of the subject property from a classification of R-3, which would permit 40,000 sq. ft. residential lots, to a classification of R-4, which would permit smaller lots of only 20,000 sq. ft. The City Council denied Defendants’ request to rezone the property. Defendants took no further action to have the zoning changed, subdivided the property into one acre lots pursuant to the R-3 zoning classification, and commenced the development and sale of the lots for single family homes. They did not pay the $500,000 balance of the purchase price. Plaintiff sued, asking the court to order Defendants to file suit or seek an administrative remedy challenging the City Council’s decision. The trial court ruled in favor of Defendants, and Plaintiff appealed.
On appeal, Plaintiff took the position that the term “best efforts” required Defendants to continue to attempt to change the zoning even though the City had denied the application. Defendants argued that since there was no explicit provision in the parties’ written agreement that required them to pursue rezoning beyond the City Council, they were not obligated to do so. The Illinois Appellate Court held the “plain language of the parties’ agreement clearly and unambiguously indicates that the defendants were only required to pursue rezoning in proceedings before the City Council and the defendants complied with that obligation.” Moreover, the court would not rule that “best efforts” required Defendants to file a suit against the City or otherwise attempt to overturn its decision regarding the zoning.
The lesson is that while Defendants prevailed, they certainly must have spent a great deal of money defending against Plaintiff’s action. Had the term “reasonable efforts” been used instead of “best efforts,” Defendants may have been able to avoid the cost of the trial and the appeal. While there will always be some subjectivity is distinguishing between “reasonable” and “best” efforts, the latter will almost certainly require that a party do more than the former. Having your attorneys review the terms of agreements during negotiation is nearly always worth the fees incurred since it may prevent the type of litigation that occurred in this case. Please do not hesitate to telephone us if you need assistance in drafting or reviewing contracts.