Wood v. Lucy, Lady Duff-Gordon
Citation: Court of Appeals of New York, 222 N.Y. 88 (1917)
Facts
Lucy, Lady Duff-Gordon, a fashion designer and celebrity, entered an agreement granting Otis Wood the exclusive right to place her endorsements on third-party designs and to market her own designs, in exchange for half the profits from any such dealings. She subsequently placed endorsements without Wood’s involvement and without sharing profits. Wood sued for breach, and Lucy argued the contract was unenforceable because Wood had made no express promise to do anything on her behalf.
Issue
Whether a contract is illusory and unenforceable for lack of mutuality when one party makes no express promise to perform, but performance obligations can be implied from the agreement.
Holding
Judge Cardozo held that the contract was enforceable. Although Wood made no express promise to act, his promise to use reasonable efforts to market Lady Duff-Gordon’s designs was implied by the structure of the agreement, including his exclusive rights and his obligation to account for and share profits.
Rule
A party’s promise to use reasonable efforts may be implied from the circumstances of an agreement, supplying the consideration needed to avoid the illusory-promise doctrine. Courts will imply an obligation to use good faith and reasonable efforts when the contract structure makes clear such an obligation was intended.
Significance
The case is foundational for the implied covenant of good faith and the concept that courts will read obligations into agreements to avoid treating them as illusory. Cardozo’s reasoning underlies UCC § 2-306(2), which imposes a best-efforts obligation in exclusive-dealings contracts.