WOOD V. LUCY, LADY DUFF-GORDON

N.Y. Ct. App., 222 N.Y. 86,118 N.E. 214(1917).

NATURE OF CASE: Action for damages for breach of a contract for an exclusive right of women’s clothes and hats.

U.C.C. § 2-306(2): An agreement for exclusive dealing in goods imposes, unless; otherwise agreed, an obligation to use best efforts by both parties.

Plaintiff: Otis F. Wood

Defendant: Lucy, Lady Duff-Gordon

FACTS: Wood, in a contract agreement, received the exclusive right to endorse designs with Lucy’s name and to market and license all of her designs for one year. The contract was renewable on a year-to-year basis if not terminated by 90-day notice. Lucy was a famous-name fashion designer at the time. The contract expressly stated Wood and Lucy would each receive one-half the profits. Lucy broke the contract by placing her endorsement on fabrics, dresses, and millinery (hats) without Wood's knowledge (in violation of the contract), and keeping all of the profits. Wood finds out she went behind his back and sues for damages. Lucy claimed that the agreement lacked the elements of a contract, as Wood allegedly was not bound to do anything. The case comes to this court on demurrer (motion for summary judgment).

RULE OF LAW: While an express promise may be lacking, the whole writing may be an implied promise; imperfectly expressed so as to form a valid contract.

ISSUE: If a promise may be implied from the writing even though it is not expressed, is there a valid contract?

HOLDING AND DECISION: (Cardozo, J.) Yes. While the contract did not precisely state that Wood had promised to use reasonable efforts to place Lucy's endorsement and market her designs, such a promise can be implied. Lucy's sole compensation was to be one-half the profits resulting from Wood's efforts to market and sell her designs. Also, this was a contract signed by both parties. Unless he gave his efforts, she could never receive anything. In this case, there existed an implied promise arising from the circumstances. The implication here is that Wood’s business organization will be used for the purpose for which it is adapted, i.e.-selling fashion dresses. Lucy gave an exclusive privilege to Wood to sell her designs. She was to have no right for at least a year to place her own endorsements or market her own designs without giving Wood half the profits. Wood's promise to make monthly accountings and to acquire patents and copyrights as necessary showed the intention of the parties. This implies that the promise has value by showing that Wood had some duties.

A bilateral contract can be express, implied in fact, or a little of both. The finding of an implied promise within a contract (for the purpose of establishing sufficient consideration to support an express promise) can be used to uphold agreements, which seem to be illusory.