Professor Elizabeth Trujillo Contracts: Illusory Promises
Here is a case from my contracts course which explains the concept of exclusive dealings and implied duties. In this case, well-renowned 20th century fashion designer lost a lawsuit for not following her own 50-50 promise to an employee.
Case Name, Citation Number, Author
Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917)
Plaintiff (Wood) sued Lucy, Lad Duff-Gordon for contract breach. Defendant denied contract breached and said that contract lacked elements of a legal contract–Wood never promised anything. 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.
Courtesy of http://www.lawnix.com/cases/wood-lucy.html
–Lady Duff Survivor of the Titanic and famous 20th century clothing designer.
–She has designer stores in NYC & Paris; Set fashion early 20th century;
–Wood had contracted an agreement with Lucy to exclusively endorse clothing with Lucy’s name and to market her fashion designs–In exchange, Lucy would get 50% of the profits
–Lucy then gave her endorsements to products without Woods’ knowledge
–Wood sues for contract breach.
–Lucy agues there were no essential elements of a legal contract! There was no written contract; it lacked mutuality; and he didn’t commit to do anything therefore no bargain for exchange.
Is there an implied duty of “best efforts” in an exclusive contract, when its not written?
Yes because there was an incentive that he had an implied duty; her duty was to give exclusive rights to the plaintiff to market her clothing.
Requirements contracts have an implied obligation of good faith and fair dealings; exclusive dealings contracts have implied term to use reasonable efforts to fulfill duties.
–Hon. Cardozo: it implied that the contract required wood to use “reasonable efforts to market Lucy’s name and designs
–The law has out-grown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal
–When you have exclusive contract you have BEST EFFORTS DUTY
–Deal was one of exclusivity which naturally meant there was incentive for Wood to use reasonable efforts to generate profit for both parties.
UCC §2-306(2) “Best Efforts” agreement for exclusive dealings in the kind of goods concerned imposes an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale
Say what you mean and mean what you say. In every exclusive dealings, either on paper or in oral, implied duty of good faith AND best efforts are imposed.
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