Citation. 222 N.Y. 88, 118 N.E. 214 (1917)
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The Defendant, Lady Duff-Gordon (Defendant), agreed to allow the Plaintiff, Wood (Plaintiff), to promote her product and split profits. When Defendant places an endorsement without Plaintiff, he sues for withheld profits.
Synopsis of Rule of Law.
Mutuality can be implied based on the terms of a contract.
Facts.
Defendant is a fashion designer who entered into an agreement that Plaintiff would in her employment promote her label. In return they were to split the profits. Defendant placed an endorsement without Plaintiff’s knowledge and withheld profits from him. In exchange for an exclusive agency he would promote her trademarks, but never exclusively to promise work.
Issue.
Can there be mutuality implied in a contract?
Held.
Yes. Reversed.
“The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today. A promise may be lacking, and yet the whole writing may be “instinct with an obligation, ‘imperfectly expressed.’ If that is so, there is a contract.” Payment to defendant was a share of profits and as a result the court finds an implication, otherwise the transaction would have lacked the efficacy both parties must have intended it to have. It can be fairly implied that plaintiff will use his best reasonable efforts. Additionally, it is possible for plaintiff to breach the contract in regards to the monthly statement or acquiring trademarks and patents.
There is an implied duty of good faith that the court imposes on the defendant. Agency law plays a role in placing this fiduciary type duty upon the parties to an agreement. Cordozo sees the duty arising straight from the terms of the contract and both parties received consideration and a mutual benefit and it is simplified the defendant would use his best efforts to fulfill the terms of the contract or else it would be superfluous.
Discussion.
The court places a duty of good faith on the parties based on the terms agreed to between the parties. Due to the fact the promise has value (1/2 profits and no up front fee) the court places a duty on the parties.
