CONTRACTS I
11.5.09
Notes
Rules of Contract Law
Crunch Time
CaseNote
Nanakuli (cont.)
 Waiver- intentional relinquishment of one’s right. One time thing.
 The more times you allow price protection (repetitive action)  course of
performance
Implied Terms

An implied term, aka a term that the court does not find in the parties’
agreement, even as broadly view, but that the court holds should be
o “Implied by Law”- made a part of that agreement by operation of the
rules of law rather than by the agreement of the parties themselves.
 Sometimes a term will be implied (in this latter sense) because
a statute so provides; sometimes because common law
precedents dictate, or because the court concludes that in the
particular case its implication is appropriate.
Wood v. Lucy, Lady Duff Gordon (p.438)
 PH
o
The trial court denied a motion for judgment on the pleadings filed
by Lady Duff Gordon (good for Wood, bad for Duff-Gordon).
o
The Appeals Court reversed the trial court and granted the motion
(bad for Wood).
o
Wood, the clothing manufacturer, appealed. Woods contends
asserted that Lady Duff was bound by an implied contract.
 ISSUE
o If a promise may be implied from a writing even though it is
imperfectly expressed, is there a valid contract?
 FACTS
o Lady Duff Gordon is a style-fashion icon. Clothing and such sell if her
name is on it
o Duff Gordon () made a deal with Wood (), a clothing manufacturer,
to make clothes and accessories that she would put her name on if she
approved. Wood could sub contract out to have others market the
designs.
o Duff Gordon was to receive one-half of 'all profits and revenues'
derived from any contracts Wood might make.
o The exclusive right was to last at least one year from April 1, 1915,
and thereafter from year to year unless terminated by notice of 90
days.



o Wood says that he kept the contract on his part, and that Duff-Gordon
broke it by placing her endorsement on other products without his
knowledge and withheld the profits.
HOLD
o The judgment of the Appellate Division should be reversed and the
order of the special term affirmed with costs
RULE
o If a promise may be implied from a writing even though it is
imperfectly expressed, there is a valid contract
o UCC § 2-306 Output, Requirements and Exclusive Dealings
1. A term which measures the quantity by the output of the seller
or the requirements of the buyer means such actual output or
requirements as may occur in good faith, except that no
quantity unreasonably disproportionate to any stated estimate
or in the absence of a stated estimate to any normal or
otherwise comparable prior output or requirements may be
tendered or demanded.
2. A lawful agreement by either the seller or the buyer for
exclusive dealing in the kind of goods concerned imposes
unless otherwise agreed an obligation by the seller to use best
efforts to supply the goods and by the buyer to use best efforts
to promote their sale.
REASON
o It is true that he does not promise in so many words that he will use
reasonable efforts to place the defendant’s endorsements and follow
her designs.
 Such a promise is fairly to be implied
o Such an arrangement would have lacked “business efficacy,”
according to Judge Cardozo, because it would have effectively placed
one party (Lucy at the mercy of another (wood), and therefore the
court implied a duty on Wood’s part to use reasonable efforts on
Lucy’s behalf
Leibel v. Raynor Manufacturing Co. (p.442)
 PH
o - argued on the ground that he agreement was for an indefinite
duration, and that it could be terminated at will by either party
o - resisted the motion on the theory that he was entitled reasonable
notice of  intention to terminate the agreement
 ISSUE
o Was Appellant entitled to reasonable notice of Appellee's intention to
terminate the verbal agreement?
 FACTS



o The parties entered into an oral agreement whereby  was to have an
exclusive dealer-distributorship for ’s garage doors in a territory
extending for a 50-mile radius from Lexington, Kentucky.
o The agreement was entered into on or about March 1, 1974.
HOLD
 Appeals disagrees with the conclusions of the TC and hold that
reasonable notification is required in order to terminate an ongoing oral agreement for the sale of goods in a relationship of
manufacturer-supplier and dealer-distributor or franchisee.
 The summary judgment must therefore be set aside and
determination must be made on the factual issue of whether or
not the notification of termination given in this case was
reasonable under the circumstances.
o Yes. Appellant was entitled to reasonable notice of Appellee's
intention to terminate the verbal agreement.
 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 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
o Where there is a relationship of manufacturer-supplier and dealerdistributor, reasonable notice of intent to terminate an ongoing verbal
agreement is required under the UCC.
o Implied covenant of good faith  implied in law
o UCC § 2-309 Absence of Specific Time Provisions; Notice of
Termination
 The time for shipment or delivery or any other action under a
contract if not provided in this Article or agreed upon shall be a
reasonable time.
 Where the contract provides for successive performances but
is indefinite duration it is valid for a reasonable time but unless
otherwise agreed may be terminated at any time by either
party
 Termination of a contract by one party on the happening of an
agreed event requires that reasonable notification be received
by the other party and an agreement dispensing with
notification is invalid if its operation would be unconscionable.
REASON
o Transactions involving goods and merchandise fall under Article II of
the UCC.
 The trial court concluded that the Code, as it applies to the sale
of goods, was not intended to apply to the situation in this case



The court concluded that even if the UCC did apply, actually
notice of termination would still need to be given
If the court required reasonable notification for termination of
the agreement, it would be making a contract for the parties by
stating a time for the duration of the contract.
Notes
o Enforcing distributorship agreements
 Problematic under Common Law
 In f the agreement failed to impose definite obligations on the
dealer, or if it was of indefinite duration (so that either party
was free to terminate the agreement at any time), the
agreement could be held the unenforceable for lack of
consideration or lack of mutuality of obligation.
Obligation of Good Faith
UCC § 1-201(b)(20) General definitions: Good Faith
 “Good faith,” except as otherwise provided in Article 5, means honesty
in fact and the observance of reasonable commercial standards of fair
dealing.
Indefiniteness
 Generally: No contract will be found if the terms of the parties’ “agreement”
are unduly indefinite. (Ex: A and B agree that B will buy widgets from A from
time to time. The parties do not decide anything about the quantity, price
delivery, etc. A court would probably find that even though A and B may have
meant to conclude a binding agreement, the absence of terms makes their
agreement void for indefiniteness.
o Court supplies missing term:
But if the court believes that he
parties intended to contract, and the court believes that it can supply
a “reasonable” value for the missing term, it will generally do so.
 UCC- The UCC expressly allows the court to fill in terms for
price, place for delivery, time for shipment, time for payment,
etc., as long as the parties have inteded to make a contract. See
§ 2-204(3). The UCC also implies a term requiring good faith in
every contract for the sale of goods. § 1-203.
 Non-UCC- In non-UCC cases, most modern courts follow this
“supply the missing term on a reasonable basis” approach, as
long as the parties have shown intent to create a binding
contract.
 Too Indefinite- But there may be situations where even though
the parties intended to create a binding contract, they have
fleshed out the terms of the deal so little that the court simply
cannot meaningfully supply all of the missing terms. In that
case, the court will find the agreement void for indefiniteness.
(rarity)
o Implied Obligation of Good Faith- In both UCC and non-UCC
contracts, an important type of term the court will supply is an
obligation of good faith and fair dealing. See, e.g., UCC § 1-304, which
says that “every contract or duty within this Act imposes an obligation
of good faith in its performance or enforcement”
 Consistency with other party’s expectations: An important
aspect of this duty of good faith is that a party is required to
behave in a way that is consistent with the other party’s
reasonable expectations about how the contract will work.
 Ex
o
Seidenberg v. Summit Bank (p.451)
 PH
 ISSUE
 FACTS
 HOLD
 RULE
 REASON