Wood v. Lucy, Lady Duff-Gordon

Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917) New York Court of Appeals Plaintiff: Defendant: Cause of Action: Breach of k Relief Sought: damages Basis for Dispute: Law Facts: - Wood entered into a k with Lucy whereby Lucy agreed to grant Wood the exclusive right to place her endorsement on other’s clothing designs. She also granted Wood the exclusive right to market her designs and sell them. - In return, Lucy would receive 50% of the profits from Wood’s efforts with regard to her endorsements and designs. - Wood agreed to keep records of all accounts and to take out all patents, copyrights, and trademarks necessary to protect Lucy’s designs. - Lucy later entered into a k with another company whereby she placed her endorsement on others’ clothing designs. - Wood filed suit, claiming breach of k. Lucy’s argument: - There is not an enforceable contract because of lack of consideration. Procedural History: Lucy filed a motion for demurrer, arguing that there was no enforceable k for lack of consideration. The trial court denied the motion. Lucy appealed. The appellate division reversed and entered judgment for Lucy. Wood appealed to the court of appeals of new York. Issue1: Can a k be enforced when there is no evidence of a promise, exchanged as consideration, in the explicit terms of the k? Rule1: A k may be enforced when there is no evidence of a promise, exchanged as consideration, in the explicit terms of the k. Application1: - Wood made a promise to use reasonable efforts to place endorsements and market Lady DuffGordon’s designs. Because Lucy gave an exclusive privilege, Wood’s acceptance of the privilege assumed it duties, one of which was to use sufficient reasonable efforts. - Also, because Lucy would receive 50% of all sales, it is clear that both parties intended that Wood would use sufficient reasonable efforts because, without them, Lucy could not have expected nay payment. - Wood’s agreement that he would keep track of the accounts and take out protections necessary for the designs implies he would promise to use sufficient reasonable efforts. Conclusion: Based upon these facts, it is clear that a promise to use reasonable efforts to place endorsements and market the designs is a term of the k and should be implied. Issue2: Whether a promise to use reasonable efforts may be implied from the entire circumstances of the k. Rule 2: A promise to use reasonable efforts may be implied from the entire circumstances of a k. Once successfully implied, the promise may constitutes sufficient consideration to create a valid and enforceable k. Application: - Lucy gave Wood an exclusive privilege to place her endorsements on products and market her designs. The acceptance of this exclusive right by Wood equaled an assumption of the basic duties encompassed in that right. - Lucy was not to receive any compensation other than ½ of all agreements formed by Wood’s efforts. Thus, unless Wood used reasonable efforts, Lucy would not receive any compensation, and there would be no basis for the parties to have entered into such an agreement. - Wood agreed to provide a monthly accounting of his profits and activities to Lucy. If he was not under a duty to use reasonable efforts to earn profits, this accounting would be meaningless. Thus, Wood’s promise to pay Lucy ½ of the profits and revenues resulting from his excusive privilege to use her endorsement, as well as his promise to provide a monthly accounting of his profits supports the implication that Wood had a duty to use reasonable efforts to create profits and revenues. - This promise by Wood constitutes sufficient consideration to form a valid and enforceable k w/ Lucy Court’s Holding(s): - Issue 1 – judgment of appellate court is reversed - Issue 2 – judgment of appellate court is reversed