Contracts · 1917

Wood v. Lucy, Lady Duff-Gordon Case Brief

Wood's obligation appeared in the arrangement as a whole, even though no sentence expressly promised marketing efforts. Exclusive authority, revenue-based compensation, a business organization and accounting duties together supported the inference that he would try to produce revenue. Reading the document as permission to remain idle would leave Duff-Gordon dependent on activity he had never undertaken. The court treated the missing express promise as an interpretation question supported by those terms, not an invitation to improve any incomplete agreement. The complaint could therefore proceed. Proof that Duff-Gordon breached, and a measure of damages, remained different matters. When a problem expressly disclaims an efforts obligation, confront that language and any other claimed exchange; the inference made here cannot simply be imported into a differently written bargain.

The brief

Wood v. Lucy, Lady Duff-Gordon
Citation222 N.Y. 88, 118 N.E. 214 (1917)
Court and yearNew York Court of Appeals, 1917
Procedural postureWood sued for breach, and the case came up on demurrer. The Special Term rejected the demurrer, and the Appellate Division reversed. The Court of Appeals reversed the Appellate Division and affirmed the Special Term, four judges to three.
FactsLucy, Lady Duff-Gordon called herself a creator of fashions, and her approval helped sell dresses and other goods. She gave Otis Wood the exclusive right, subject to her approval, to place her endorsements on the designs of others and to put her own designs on sale or license them, for at least one year from April 1, 1915 and then year to year. She was to get half of all profits and revenues. The contract did not expressly promise that Wood would use any effort. He said she placed her endorsement on fabrics, dresses, and millinery without his knowledge and kept the profits.
IssueWas Wood's promise, which did not expressly commit him to any effort, supported by consideration?
RuleA promise may be implied in fact from the circumstances, and where the whole writing is 'instinct with an obligation,' a court will imply a duty of reasonable efforts.
HoldingThe writing implied a promise that Wood would use reasonable efforts. That promise supplied consideration, so the complaint survived the challenge to its legal sufficiency. The court did not adjudicate damages or prove the alleged breach at this stage.

Reasoning

Duff-Gordon could market through no other agent, and her compensation depended on revenues Wood generated. The agreement also described his suitable business organization, required monthly accounting, and contemplated protection of the relevant intellectual-property rights. Together those terms indicated that he undertook to put his organization to work.

Cardozo inferred reasonable efforts from that commercial arrangement. A reading that let Wood do nothing would deprive the revenue-sharing agreement of its intended function. The issue was whether the pleaded contract contained an obligation, not whether the court should invent a different deal for the parties.

Why it is assigned

Support an implied promise with specific terms: exclusivity, contingent compensation, business capacity, accounting, and protection of rights. Avoid asserting that every agreement missing an express efforts clause is enforceable. The surrounding writing must support the inference.

Limits of the holding

For exclusive dealing in goods, UCC § 2-306(2) separately supplies best-efforts duties to supply and promote the goods unless the parties agree otherwise. Distinguish that statutory language from Wood's reasonable-efforts inference from the actual agreement.

Two changed-facts hypotheticals

Hypothetical 1

Change the facts so that the contract says Wood 'may, at his sole option, market the designs, and has no duty to do so.'

Show the analysis

An express disclaimer makes it harder to infer the efforts undertaking found in Wood. Identify any other binding promise or exchanged value before deciding that the whole agreement lacks consideration. If the claimed exchange consists only of a completely optional marketing promise, the illusory-promise objection is stronger; the actual decision did not address this express disclaimer.

Hypothetical 2

Change the facts so the contract were for the sale of goods under UCC Article 2.

Show the analysis

UCC 2-306(2) would impose an obligation of best efforts by the seller to supply the goods and by the buyer to promote their sale, unless the parties agreed otherwise.

Quick answers

What is an implied duty of reasonable efforts?

In Wood, the writing's exclusivity, contingent compensation and related business obligations supported an implied promise to pursue the arrangement with reasonable efforts. The inference supplied the obligation missing from an isolated reading of the express promises. Exclusivity alone is not a reason to ignore contrary language or the rest of an agreement.

More contracts cases

· Contracts course guide