This is the second of three contributions focusing on certain peculiarities of Quebec’s civil law legal environment within North America (Part I can be found here).
While outsourcing and sophisticated professional IT services agreements typically deal with quality and performance issues through mechanisms such as service levels, penalties and credits, warranties and other related concepts, one will occasionally come across a client request to have the vendor commit to using “best efforts” to achieve a certain desired result. Vendors typically bark at this as they fear that such a commitment might be open-ended and require the deployment of resources and efforts beyond what would be reasonable in light of the contract’s value.
In a recent file, a large – and sophisticated – Quebec-based customer was insisting that my client agree to commit to use “best efforts” to meet certain project deadlines. As the draft agreement was heavily drafted in favour of the customer already – and obviously did not feature any vendor-friendly “savings” clause – no one on our side of the table was thrilled at the idea of agreeing to the client’s request. While I had general knowledge of the typical challenges raised by the concept of “best efforts” at common law, I had (strangely) never looked at the issue in my own civil law jurisdiction. To some degree of surprise, what I then discovered was far from the apocalyptic scenarios typically invoked in reference to “best efforts” …
To start with, one needs to understand that obligations (or covenants) in civil law are generally classified in three categories depending on their intensity: obligations of means, obligations of result and obligations of warranty.
Obligations of means only require a debtor to act prudently and diligently and to use all reasonable means so as to endeavour to achieve a certain result. No result is guaranteed, however. Examples of this include where one hires an artist to do a painting, a doctor for treatment, an employee for a certain job, or even – but only in certain cases – a service provider to design, implement or integrate a system. The (primary) interesting consequence – from a vendor’s standpoint – of having an obligation classified as an obligation of means is that the debtor will be deemed to have duly and fully performed its obligation as long as it can show that it acted prudently and diligently and used all reasonable means so as to endeavour to achieve the intended result, regardless of whether or not the result was actually achieved after all. Needless to say, customers are typically not found of obligations of means (that being said, through mechanisms such as specifications-focused warranties, exclusive remedies and SLAs, most sophisticated IT contracts practically end up favourably putting the vendor in an “obligation of means” position when compared to the customer’s initially intended business objective).
Obligations of result, to the contrary and as their name rightfully suggests, require a debtor to actually achieve the bargained for result except only where the debtor can rightfully invoke a force majeure or the creditor’s fault to be excused. But, other than force majeure scenarios or for the fault of the creditor, the debtor must achieve the intended result, regardless of the amount of effort required. Most contractual obligations actually fit in this category (including – in most cases and for this crowd’s particular interests – a service provider’s obligation to design, implement or integrate a system).
Lastly, obligations of warranty represent the most stringent category. Here, force majeure is not even a defence. Only the creditor’s fault could serve to excuse a debtor’s failure to achieve the contracted for result!
Curiously, when we reviewed the issue at the time, we found very little case law – let a lone any elaborated case law – discussing “best efforts” under Quebec law. The few cases identified in Quebec and touching upon this concept generally took the view that this concept could be seen as requiring the debtor of an obligation of means to use somewhat greater efforts than is generally required at law, but without going so far as requiring it to use “unreasonable” means in doing so. Given the fact that – as is most generally recognized – most contractual obligations are obligations of result anyway, this analysis suggested two very positive consequences for debtors (or vendors, in our case). First, by qualifying an obligation with a requirement to use “best efforts” one is probably impliedly labelling it as an obligation of means, not an obligation of result. Second, having to use “best efforts” probably doesn’t require a debtor to use “unreasonable” or exaggerated” means to endeavour to achieve an intended result.
Back to our file – and with the above in mind – the large Quebec customer and the vendor were eventually able to agree on the following definition of “best efforts” in the contract:
“Best Efforts” means all required reasonable efforts that a prudent and diligent party must use to meet its obligations under this Agreement but without warranty to the other party that any result will actually be achieved”
So next time you hear a vendor barking at the possibility of having an agreement governed by Quebec law, make sure it uses its “best efforts” to consider all implications first …