Wood v. Lucy, Lady Duff-Gordon

New York Court of Appeals · 1917 · Contracts

Contractsconsiderationillusory promiseimplied obligationexclusive dealingexclusive agencyreasonable effortsimplied promise

Facts

The defendant, a fashion creator whose name had commercial value, gave the plaintiff the exclusive right, subject to her approval, to place her endorsements on others' designs and to market her own designs or license others to do so. In return, she was to receive one-half of all profits and revenues from contracts the plaintiff made, and the arrangement was to last at least one year and continue yearly unless terminated on ninety days' notice. The agreement was signed by both parties and also required the plaintiff to account monthly for money received and to secure patents, copyrights, and trademarks as he thought necessary. The plaintiff alleged that he performed, but that the defendant made endorsements without his knowledge and kept the profits.

Issue

Whether the agreement was unenforceable for lack of consideration because the plaintiff did not expressly promise to do anything. More specifically, the question was whether a promise by the plaintiff to use reasonable efforts could be implied from the exclusive agency contract.

Rule

A contract may be enforceable even if a party's promise is not stated in express words, so long as the writing, read as a whole, is instinct with an obligation. In an exclusive agency arrangement, where one party's compensation depends on the other party's performance and the circumstances show the parties intended a real business arrangement, the law may imply a promise to use reasonable efforts, which supplies consideration and prevents the promise from being illusory.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Chicago, jewelry designer Nina Solis signed an agreement giving Harbor Lane Merchandising the exclusive right for one year to license her name for use on accessories, subject to her approval of each product. The agreement said Nina would receive 50% of all net profits from licensing deals Harbor Lane secured, but it did not expressly state that Harbor Lane had to seek any deals.

If Nina later argues the agreement is unenforceable because Harbor Lane made no express promise to do anything, what is the strongest response?

Explanation. The majority rule is that a contract may be enforceable even without express promissory words if the writing as a whole is instinct with an obligation. In an exclusive agency where the grantor's sole compensation depends on the agent's performance, the law may imply a promise to use reasonable efforts. The approval condition does not negate that implied duty.