Licensing agreements are an important facet of the fashion industry.  The rights and responsibilities allocated between two parties can involve hundreds of thousands of dollars making precise contract drafting of utmost importance.  One issue with licensing agreements is whether an exclusive licensing agreement necessarily requires a licensee to undergo reasonable efforts to place licensed products even if such a requirement is not explicitly stated in the contract.  The preeminent case on this matter is Wood v. Lucy, Lady Duff-Gordon. [1]

History of Lady Duff-Gordon 

Lady Duff-Gordon was a designer from humble beginnings who transformed herself from dressmaker to international fashion couturiere.[2]  Lady Duff-Gordon was born in Canada in 1864 to a family with a modest income.  She had a younger sister who became the celebrity Elinor Glyn and although Lady Duff-Gordon's first designs were tea gowns that she made for friends, through her famous sister's contacts, Lady Duff-Gordon became the head of a noted fashion house.[3]  At her professional height of popularity Lady Duff-Gordon dressed the 'it' girls of the time in her signature style which "broke down the visual barrier between the lady and her clothes."

It is often noted that Lady Duff-Gordon was aboard the Titanic when called to New York for business purposes.[4]  She and her husband survived the tragedy; however their escape was not without controversy.[5]  Although the crew was instructed to board women and children first on lifeboats, Lady Duff-Gordon refused to leave without her husband – and the ship officers ordered them into a lifeboat together, against policy.[6]  Incredibly, it was also rumored that Lady Duff-Gordon's husband had paid the crew to row away before the lifeboat was filled, thus forsaking the lives of approximately thirty people.[7] 

Wood v. Lucy, Lady Duff-Gordon

The opinion for Wood v. Lucy, Lady Duff-Gordon states that Lady Duff-Gordon entered into an exclusive licensing agreement with a marketer, Otis Wood, for her endorsements and designs, the two parties splitting the profits 50/50.[8]  However, when Lady Duff-Gordon began to place her endorsements on cheaper ready-to-wear products for Sears on her own without telling the marketer or giving him any profits, the marketer sued Lady Duff-Gordon for breach of contract.[9]   Lady Duff-Gordon argued that she had no enforceable contract with the marketer because the licensing agreement stated no consideration – the marketer was not bound to do anything in exchange for the license.[10]  However, the court found that within the licensing agreement was an implied promise that the marketer would use reasonable efforts to place the endorsements and designs which was sufficient consideration to make the contract valid.

The Legacy of Wood v. Lucy, Lady Duff-Gordon

The outcome of Wood v. Lucy, Lady Duff-Gordon is important to the fashion industry for a couple of reasons. First of all, this case promulgates a good faith requirement underlying all contracts.[11]  Because precedent states that a licensee must use reasonable efforts to place a licensed product, a licensee may not sit on his rights without breaching the agreement. Further, an exclusive licensing agreement may thus be enforced even when there is no explicit covenant on the part of the licensee to use reasonable efforts to place a product.[12] 

This case was also decided at a key time in the fashion industry and in law, making it an important precedent. Lady Duff-Gordon was “a ground-breaking entrepreneur . . . who transformed herself from a dressmaker for a few acquaintances into an international couturiere secure in fashion history.”[13]  Therefore, by deciding a previously non-adjudicated matters concerning Lady Duff-Gordon, a pioneer of the fashion industry, the court set an important precedent for fashion industry licensing contracts – the implied duty of reasonable effort upon the licensee.[14]  Likewise, Lady Duff-Gordon’s breach of the agreement by placing her endorsements on Sears’ ready-to-wear line was somewhat prophetic of contemporary designers’ deals with Target and H&M.[15]  This opinion clarifies the rights and responsibilities of the respective parties to an exclusive licensing agreement and limits a designers’ freedom to contract with third parties when subject to such an agreement.

The opinion for Wood v. Lucy, Lady Duff-Gordon is somewhat controversial among scholars because of the role that unconscionability plays in validating the licensing agreement.[16]  Generally, a contract is voided by a court if it is unconscionable even though it has all the necessary elements of a contract.[17]  However, the court in the Lady Duff-Gordon case used the doctrine of unconscionability to validate the exclusive licensing agreement by finding consideration in an illusory contract.[18]  This outcome is viewed as particularly anomalous because one would expect a court to protect the tactically disadvantaged party to a contract, not favor the party benefitting from an unfair omission.[19]  In Wood v. Lucy, Lady Duff-Gordon however, the marketer who had essentially covenanted to do nothing benefitted from the court's finding his bargaining unconscionable.[20] 

It has also been noted that Judge Cardozo, in writing the opinion for this case, took on a demeaning tone with respect to Lady Duff-Gordon, saying she "styles herself" a "creator of fashions" whose "favor helps a sale."[21]  Although his condescension likely stemmed from a strongly held perception of the fashion industry as frivolous, his tenor is troublesome to some scholars because of the utter disrespect it displays toward litigants, something deemed wrongful in other contexts. What perhaps is particularly distasteful about Cardozo's comments is the fact these comments were made despite Lady Duff-Gordon's incredible success as a designer at a time when women were shunned from involvement in the business world.[22]

As one of the earliest cases involving fashion law, Wood v. Lucy, Lady Duff-Gordon provides an important precedent for exclusive licensing agreements in the fashion industry, not to mention its lasting significance in contract law in general.