222 N.Y. 88 (1917)
One-Sentence Takeaway: In exclusive agency or output/requirements contracts, courts will imply a promise to use reasonable efforts to make the deal work, even if not specifically stated in the contract.
Summary: Defendant (Lucy), an influential fashion guru, employed Plaintiff (Wood) to help her market her appeal. Plaintiff was to have exclusive rights to market Defendant’s designs and, with her approval, place her endorsements on the designs of others. In return, Defendant would receive half of the profits from the contracts Plaintiff made and reported to her on a monthly basis.
Plaintiff alleged that Defendant breached the contract by placing her endorsement on designs without his knowledge and withholding the profits from those endorsements. He sued for damages. Defendant argued that Plaintiff did not promise anything because the contract does not specifically say that he had to endorse/sell.
The court rejected Defendant’s argument and found consideration because “best efforts” by Plaintiff were implied in the contract.
REFERENCE DESK
In Advanced Water Technologies, Inc. v. Amiad U.S.A., Inc., 457 F.Supp.3d 313 (S.D.N.Y. 2020), a district court summarized the Wood opinion and its progeny as follows:
In Wood, the defendant gave an exclusive privilege to the plaintiff. She was to have no right for at least a year to place her own indorsements or market her own designs except through the agency of the plaintiff. The plaintiff, for his part, merely accepted the exclusive agency and agreed to give the defendant half of the profits he commanded. Unless he gave his efforts, she could never get anything. Judge Cardozo refused to suppose that one party was to be placed at the mercy of the other and therefore determined that a promise to use reasonable efforts to place the defendant’s indorsements and market her designs was fairly to be implied–explaining that the law had outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. “A promise may be lacking, and yet the whole writing may be `instinct with an obligation,’ imperfectly expressed,” Judge Cardozo explained.
As first articulated in Wood, and confirmed by that case’s progeny, New York law may imply into an agreement an obligation that a licensee must use reasonable efforts to exploit the licensed products. In other words, it is settled law that the court will imply a duty on the part of an exclusive licensee to exploit the subject matter of the license with due diligence, where such a covenant is essential as a matter of equity to give meaning and effect to the contract as a whole. The reasoning of these decisions is that it would be unfair to place the productiveness of the licensed property solely within the control of the licensee, thereby putting the licensor at his mercy, without imposing an obligation to exploit upon the licensee. In effect the court is merely enforcing an obligation which the parties overlooked expressing in their contract or which they considered unnecessary to be expressed.