Thursday, March 2, 2006
In his famous opinion in Wood v. Lucy, Lady Duff Gordon, Judge Cardozo fashioned an implied "good faith efforts" term in a license agreement. He apparently assumed that the parties must have intended some such obligation, although the contract was silent.
Not so fast, my friend, says Victor Goldberg (Columbia). In Reading Wood v. Lucy, Lady Duff-Gordon with Help from the Kewpie Dolls, a section of his excellent upcoming book, Framing Contract Law: An Economic Perspective (Harvard 2006), he looks at Otis Wood's involvement in an earlier piece of litigation involving a similar license, and suggests that the failure to include a best efforts clause was conscious and deliberate. (Left: Goldberg; right, Kewpie Doll, courtesy Wikipedia.) Here's the abstract:
In Wood v. Lucy, Lady Duff-Gordon, Cardozo found consideration in an apparently illusory contract by implying a reasonable effort obligation. Unbeknownst to Cardozo, Wood had agreed to represent Rose O'Neill, the inventory of the Kewpie doll in an earlier exclusive contract. Wood sued O'Neill two months prior to entering into the Lucy arrangement. That contract included an explicit best efforts clause. The failure to include such a clause in this contract was, quite likely, deliberate, suggesting that Wood was trying to avoid making a binding commitment to Lucy. The paper examines both the Kewpie doll and Lucy contract in some detail. It then goes on to argue that the decision's role in finding consideration is probably minimal -- it would be easy enough for the parties to provide an alternative source of consideration if they desired. The mischief of the opinion is its impact on contract interpretation. The UCC and some common law courts have taken to imposing a vague effort standard on promisors, even if there exists an explicit source of consideration.