Yes. Falstaff broke its 'best efforts' promise. That promise meant Falstaff couldn't just ignore Ballantine sales to boost its own profits. The court reasoned that 'best efforts' means more than just being honest; it means you have to actively work to achieve the contract's goal. Because Ballantine only got paid if Falstaff sold beer, Falstaff had a duty to keep sales up. Falstaff basically gave up on Ballantine because it was easier for its own bottom line. Since sales dropped so badly, it was Falstaff's job to prove there was nothing reasonable it could have done without going broke, and it couldn't.

The appeals court agrees with the lower court that Falstaff broke its promise because it didn't try hard enough to keep Ballantine beer sales up after buying the brand. Falstaff didn't have to lose lots of money trying to sell Ballantine beer, but it did have to seriously consider what was best for Ballantine and try reasonable things to keep sales from dropping so much. It was up to Falstaff to prove there wasn't anything big it could have done to slow down the drop in sales without losing a ton of money. The court also says the law in New York about these kinds of promises isn't super clear, so each case has to be looked at carefully.

The requirement that a party use its best efforts necessarily does not prevent the party from giving reasonable consideration to its own interests.

—discussing a "best efforts" clause under New York law and noting at n. 7 that "the New York law is far from clear

In fact, New York case law interpreting other efforts clauses, including best efforts and reasonable efforts clauses, is anything but a model of clarity.

—affirming lower court's enforcement of contractual provision in which promisor agreed to use best efforts to promote and maintain a high volume of promisee's products

Under New York law "a best efforts clause imposes an obligation to act with good faith in light of one's own capabilities."

The burden then shifted to [defendant] to prove there was nothing significant it could have done to promote [plaintiff's] sales that would not have been financially disastrous

For example, when the company that made Ballantine beer failed, the name and the distribution network were sold to Falstaff

—noting that Defendant was "bound to make a good faith effort to see that substantial sales of [Plaintiff's] products were made" and given its failure to do so, the judge may a reasonable estimate of royalties that would have been due

Whether performance meets the standard required under a contract is often a question of fact, as the Elliott Group argues.

Just as a business need not "spend itself into bankruptcy" to comply with a best-efforts clause, a tenant need not render herself destitute before invoking the eviction moratorium.

Yes. A party breaches a 'best efforts' clause when it prioritizes its own profitability over maintaining the contractually-mandated high sales volume, unless it can prove that any reasonable promotional efforts would have been financially disastrous. The 'best efforts' clause required Falstaff to do more than simply act in good faith; it prevented Falstaff from applying a profit-über-alles philosophy to the Ballantine brands without fair consideration of the effect on sales volume. The royalty payments were an essential part of the purchase price, creating an obligation for Falstaff to see that substantial sales were made. Once the plaintiff showed that Falstaff allowed Ballantine's volume to plummet while focusing on its own profit picture, the burden shifted to Falstaff to prove there was nothing significant it could have done to promote Ballantine sales that would not have been financially ruinous, a burden it failed to meet.

The court affirms the district court's ruling that Falstaff breached the best efforts clause because Falstaff did not make adequate efforts to promote and maintain Ballantine sales, which declined substantially under Falstaff's management. Even though Falstaff was not required to spend itself into bankruptcy promoting Ballantine products, it had an obligation to consider Ballantine's interests and explore reasonable steps to maintain sales volume. The burden was on Falstaff to prove there was nothing significant it could have done to stem the decline in sales that would not have been financially disastrous. The court notes the ambiguity in New York law regarding best efforts clauses and emphasizes the need for a fact-specific analysis in each case.

Bloor v. Falstaff Brewing Corp.

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