Opinion ID: 2997151
Heading Depth: 2
Heading Rank: 2

Heading: “Best Efforts” Clause

Text: Having found that Indiana law governs, we must now decide whether the “best efforts” clause contained in the parties’ contract is so ambiguous as a matter of Indiana law that it may not be enforced. Neither the parties nor our own No. 03-4247 7 research has found an Indiana Supreme Court or Indiana appellate court ruling on point.1 When, as here, a federal court sitting in diversity is called upon to decide an unsettled question of state law, our obligation is to deduce, as closely as possible, how the Indiana Supreme Court would rule. Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630, 636-37 (7th Cir. 2002). “[F]ederal courts of appeals must review de novo the district court’s determination of the content of state law . . . .” Id. at 636 (citing Salve Regina Coll. v. Russell, 499 U.S. 225 (1991)). Where possible, Indiana courts will construe contracts as being valid, rather than void. Ind.-Am. Water Co., Inc. v. Town of Seelyville, 698 N.E.2d 1255, 1259 (Ind. Ct. App. 1998). In applying Indiana contract law, the primary purpose is to ascertain and give effect to the intentions of the parties. Ft. Wayne Bank Bldg., Inc. v. Bank Bldg. & Equip. Corp. of Am., 309 N.E.2d 464, 467 (Ind. Ct. App. 1974). This requires courts to “read the agreement in a manner which harmonize its provisions as a whole and to give effect to the 1 The district court, in finding the “best efforts” clause at issue here so vague as to be unenforceable, relied exclusively on WrightMoore Corp. v. Ricoh Corp., 794 F. Supp. 844 (N.D. Ind. 1991), aff ’d, 980 F.2d 432 (7th Cir. 1992). In that diversity case, the district court in Indiana applied general Indiana contract-interpretation principles in finding a contract clause with the caption “Best Efforts” unenforceable for vagueness. Id. at 867. There, unlike here, the “best efforts” clause contained a quota provision; yet, that provision was never enforced and a quota was never assigned, leading the court to determine that the clause was vague and indefinite and thus, unenforceable. Id. On appeal, we declined to address the enforceability of the “best efforts” clause, affirming on other grounds. See Wright-Moore Corp. v. Ricoh Corp., 980 F.2d 432, 437 (7th Cir. 1992). Thus, we do not agree that Wright-Moore supports LOS’s position that, as a matter of law, the best efforts clause at issue here is unenforceable because of vagueness. 8 No. 03-4247 parties’ expressed intent.” Kelly v. Smith, 611 N.E.2d 118, 121 (Ind. 1993). “In most cases, the intent of the parties to a contract is to be determined by the ‘four corners’ of the contract[,]” Dick Corp. v. Geiger, 783 N.E.2d 368, 374 (Ind. Ct. App.), trans. denied, 792 N.E.2d 47 (Ind. 2003), “giving the words contained therein their plain, usual, and ordinary meaning,” Samar, Inc. v. Hofferth, 726 N.E.2d 1286, 1290 (Ind. Ct. App. 2000). “When a court finds a contract to be clear in its terms and the intentions of the parties apparent, the court will require the parties to perform consistently with the bargain they made.” First Fed. Sav. Bank of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 604 (Ind. 1990). An ambiguous contract is construed against the drafting party. MPACT Constr. Group, LLC v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 910 (Ind. 2004). Keeping in mind the general principles and rules of construction of Indiana contract law outlined above, we now turn to the contract in this case. The clause at issue here states: “This is a ‘best efforts’ agreement on the part of Lime-O-Sol and Thomas P. Hinc to market such product in a manner that seems appropriate.” The phrase, “in a manner that seems appropriate,” is obviously indefinite and could mean different things to different people, but we do not believe that the clause as a whole is so vague as to be unenforceable as a matter of law. LOS, which drafted this provision of the contract, agreed to put forth its “best efforts” to market Stain Remover and required the same of Hinc. “Best efforts,” as commonly understood, means, at the very least, some effort. It certainly does not mean zero effort— the construction LOS urges here to escape any obligation under its contract. Cf. Olympia Hotels Corp. v. Johnson Wax Dev. Corp., 908 F.2d 1363, 1373 (7th Cir. 1990) (noting that the term “best efforts” is “a familiar one in contract parlance”); E. Allen Farnsworth, On Trying to Keep One’s Promises: The Duty of Best Efforts in Contract Law, 46 U. Pitt. L. Rev. 1, 8 (1984) (noting that fifty years ago it was No. 03-4247 9 generally accepted that a duty defined only in terms of best efforts was too indefinite to be enforced, but that such a view is no longer widely held today). We believe that Indiana’s highest court would take the approach that “best efforts” provisions can be contractually enforced.2