Can a contract be valid and enforceable when one party does not expressly promise to perform any specific duties?

Lucy, Lady Duff-Gordon, a fashion creator whose endorsements increased the commercial value of products, entered into an exclusive agreement with Otis F. Wood. Under the contract, Wood received the exclusive right to place Lady Duff-Gordon's endorsements on others' designs and to market her own designs, subject to her approval. In return, Lady Duff-Gordon was to receive 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 year-to-year unless terminated with ninety days' notice. Wood claimed he performed his obligations under the contract, but Lady Duff-Gordon breached by placing her endorsements on fabrics, dresses, and millinery without his knowledge and withholding the profits. Wood sued for damages. Lady Duff-Gordon argued the agreement lacked the essential elements of a contract because Wood did not bind himself to any specific obligations or promise to use reasonable efforts to market her designs or place her endorsements.

Wood filed suit against Lady Duff-Gordon for breach of contract seeking damages. Lady Duff-Gordon filed a demurrer challenging the sufficiency of the complaint. The Special Term denied the demurrer. The Appellate Division reversed, finding in favor of Lady Duff-Gordon's position that no valid contract existed. Wood appealed to the New York Court of Appeals.

(Cardozo, J.)

Yes. A contract can be valid and enforceable even when one party does not expressly promise specific performance, if such a promise can reasonably be implied from the circumstances and terms of the agreement. The law has evolved beyond primitive formalism where precise words were required, and now takes a broader view recognizing that a promise may be lacking yet the whole writing may be instinct with obligation, even if imperfectly expressed.

Several circumstances support implying Wood's promise to use reasonable efforts. Lady Duff-Gordon granted an exclusive privilege, relinquishing her right to place endorsements or market designs except through Wood's agency for at least one year. The acceptance of exclusive agency constitutes an assumption of its duties. The parties cannot be presumed to have intended that one would be placed at the mercy of the other.

The agreement's compensation structure provides the most significant evidence of implied obligation. Lady Duff-Gordon's sole compensation was half of all profits resulting from Wood's efforts. Unless Wood gave his efforts, she could never receive anything. Without an implied promise of reasonable efforts, the transaction cannot have the business efficacy both parties must have intended.

Additional contract terms reinforce this conclusion. Wood promised to account monthly for all moneys received and to obtain necessary patents, copyrights, and trademarks. These promises would be valueless if he had no duty to market designs or place endorsements. His promise to pay half the profits and render monthly accounts was effectively a promise to use reasonable efforts to generate profits and revenues.

Dissent (Hiscock, Ch. J., Chase and Crane, JJ.) The dissenting judges disagreed with the majority's interpretation that Wood's obligations could be implied from the contract terms and circumstances, though their specific reasoning is not detailed in the provided opinion.