Summary of Wood v. Lucy, Lady Duff-Gordon

Summary of Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917).

Facts
Lady Duff-Gordon (D) contracted to give Wood (P) an exclusive right to market and license all of her designs and to endorse designs with her name. The exclusive contract required that they split all profits from Wood’s sales evenly but there was no express clause that stated that he would perform. Lucy placed endorsements on clothes without Wood’s knowledge and in violation of the contract and Wood sued.

The trial court denied Lady Duff-Gordon’s motion for a judgment on the pleadings. The intermediate appellate court reversed on the grounds that the contract lacked mutuality because Wood never promised to do anything. Wood appealed the dismissal of the complaint.

Issues
1) May a promise to use reasonable efforts be implied from the entire circumstances of a contract? 2) Can an implied promise to use best efforts be considered valuable consideration? 3) Can the duty of good faith compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties?

Holding and Rule (Cardozo)
1) Yes. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. 2) Yes. An implied promise to use best efforts in contract performance can be considered valuable consideration. 3) The duty of good faith can compensate for vagueness in an agreement to avoid invalidation of a contract clearly intended by the parties.

A contract may lack an explicit promise to further its goals. The acceptance of the exclusive agency meant that Wood had accepted the duties of that agency. Because Lady Duff-Gordon’s sole compensation was a split of the profits, there would be no efficacy to the transaction unless there was an implied promise to use best efforts.

The court held that it was clear from the terms and recitals and duties under the contract that both parties intended to do what was reasonably necessary to make it a success so that would be profits to divide. Wood’s promise to pay Lady Duff-Gordon one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly demonstrated that he had some obligations under the contract, and there was a promise to use reasonable efforts to bring profits and revenues into existence.

Disposition
Reversed.

Notes
This case is an example of the court imposing a duty of good faith on a party to perform an implied promise. Cardozo dispensed with formalism to enforce a promise that was implied when viewed in the context of numerous aspects of the agreement. An implied promise is sufficient to constitute consideration.