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Wood v. Lucy, Lady Duff-Gordon

Facts:

Defendant would design fashions and could also increase sales of the designs of others through

her endorsement. In the agreement, Plaintiff was granted exclusive right to place endorsements

and to place Defendants own designs for sale. Defendant would retain half the profits and

Plaintiff the other half of the profits. Nothing in the document expressly stated what Wood

promised to do. Plaintiffs business organization was adapted to the purpose of placing

endorsements.

Issue:

Whether there was an implied term of reasonable efforts in the contract. Whether an implied

promise to effectively market defendant's products was sufficient consideration?

Holding:

Yes,

Reasoning:

The court rejected the defendants argument that the plaintiff does not bind himself to anything.

The court stated that it is true that he does not promise in so many words that he will use

reasonable efforts to place the defendants endorsements and market her designs. We think,

however, that such a promise is fairly to be implied. Furthermore, the terms of the defendants

compensation are even more significant. Her sole compensation for the grant of an exclusive

agency is to be one-half of all the profits resulting from the plaintiffs efforts. Unless he gave his

efforts, she could never get anything. Without an implied promise, the transaction cannot have

such business efficacy as both parties must have intended that at all events it should have." The

plaintiff goes on to promise that he will account monthly for all moneys received by him, and

that he will take out all such patents and copyrights and trademarks as may in his judgment be

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necessary to protect the rights and articles affected by the agreement. Moreover, in determining

the intention of the parties, the promise has value. It helps to enforce the conclusion that the

plaintiff had some duties. His promise to pay the defendant one-half of the profits and revenues

resulting from the exclusive agency and to render accounts monthly was a promise to use

reasonable efforts to bring profits and revenues into existence.

Rule:

A promise to use reasonable efforts may be implied from the entire circumstances of a contract.

1) An implied promise to use best efforts in contract performance can be considered valuable

consideration.

2) The duty of good faith can compensate for vagueness in an agreement to avoid invalidation of

a contract clearly intended by the parties.

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Leibel v. Raynor Manufacturing Co.

Facts:

Appellee entered into a verbal agreement to give Appellant an exclusive dealer-distributorship

for Appellees garage doors. Appellee was to provide garage doors, operators, and parts to

Appellant at the factory distributor price. Appellant agreed to sell, install and service only

Appellees products. The agreement covered an area extending to a fifty mile radius from

Lexington, Kentucky. Appellant borrowed a substantial amount of money to begin the business.

After two years, sales of Appellees products appeared to be decreasing. Appellee notified the

defendant that the relationship was terminated. In addition, Appellant learned there was a new

dealer-distributor in the area and that any future purchases Appellees products would have to be

made through the new dealer-distributor.

Issue:

Was Appellant entitled to reasonable notice of Appellees intention to terminate the verbal

agreement?

Holding:

Yes,

Reasoning:

Yes. Appellant was entitled to reasonable notice of Appellees intention to terminate the verbal

agreement. Transactions involving goods and merchandise fall under Article II of the UCC. The

court finds that distributorships fall under Article II of the UCC. Article II of the UCC requires

that reasonable notice be given if the agreement is for an infinite duration. The Court interprets

reasonable notice as relating to the circumstances under which notice is given and the extent of

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advance warning not the method by which notice is given. The Court holds that Appellee was

required to give Appellant reasonable notice of intent to terminate.

Rule:

Where there is a relationship of manufacturer-supplier and dealer-distributor, reasonable notice

of intent to terminate an ongoing verbal agreement is required under the UCC.