Does an exclusive agency agreement that contains no express promise by the agent to use reasonable efforts nevertheless form an enforceable contract supported by consideration through an implied promise of reasonable efforts?

Lucy, Lady Duff-Gordon (defendant) was a fashion designer whose endorsement increased the commercial value of fabrics, dresses, millinery, and other articles. She employed Otis Wood (plaintiff) under a signed written agreement giving him the exclusive right, subject to her approval, to place her endorsements on the designs of others, and the exclusive right to place her own designs on sale or license others to market them. In exchange, Lucy was to receive one-half of all profits and revenues from any contracts Wood made. The exclusive arrangement was to last at least one year from April 1, 1915, and continue from year to year unless terminated on ninety days' notice. The agreement recited that Wood possessed a business organization adapted to placing the endorsements, and Wood promised to account monthly for all moneys received and to take out patents, copyrights, and trademarks as necessary to protect the rights involved. Wood alleged that he performed his obligations and that Lucy breached the agreement by placing her endorsement on fabrics, dresses, and millinery without his knowledge and withholding the profits. Lucy argued the agreement lacked the elements of a contract because Wood did not expressly promise to do anything.

Wood sued Lucy for damages for breach of the agreement. Lucy demurred, arguing the agreement was not an enforceable contract. The Special Term overruled the demurrer. The Appellate Division reversed, concluding that Wood had made no promise and therefore the contract lacked consideration. Wood appealed to the New York Court of Appeals.

(Cardozo, J.)

Yes. A promise to use reasonable efforts is fairly implied where the whole writing is instinct with an obligation, even though the obligation is imperfectly expressed. The law has outgrown its primitive formalism, in which the precise word was the sovereign talisman. See McCall Co. v. Wright, 133 App. Div. 62; Moran v. Standard Oil Co., 211 N.Y. 187, 198 (1914).

Several circumstances support implying the promise. Lucy granted an exclusive privilege, barring her for at least a year from placing her own endorsements or marketing her designs except through Wood. Acceptance of an exclusive agency is an assumption of its duties. One party is not to be supposed placed at the mercy of the other.

Lucy's compensation also points to the implied promise. Her sole compensation for granting exclusivity was one-half of the profits from Wood's efforts. Unless he gave his efforts, she could never receive anything. Without an implied promise, the agreement lacks the business efficacy both parties must have intended. The Moorcock, 14 P.D. 64, 68.

The express terms confirm this. The recital that Wood's business organization was adapted to placing endorsements implies it would be used for that purpose. His promises to account monthly for all moneys received and to take out patents, copyrights, and trademarks would be valueless if he had no duty to market designs or place endorsements. His promise to pay Lucy half of the profits and to render monthly accounts was a promise to use reasonable efforts to bring profits and revenues into existence. The implied promise supplies consideration, and the agreement is an enforceable contract. The Appellate Division's judgment is reversed and the Special Term's order is affirmed.