In order for a contract to be enforceable under California law, it must impose binding obligations on each party. If one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration.
Rafael Chodos is a California attorney whose specialty is the law of fiduciary duty. He began developing the idea of writing a treatise on the law of fiduciary duty that included a traditional print component as well as an electronic component that incorporated search engines, linking capabilities, and electronic indexing. In early 1995, Chodos sent a detailed proposal, which included a tentative table of contents, to the Bancroft-Whitney Corporation. Bancroft was at the time a leading publisher of legal texts. Bancroft and Chodos entered into an Author Agreement, which both parties agree is a standard form contract used to govern the composition of a literary work for hire. The Author Agreement provided for no payments to Chodos prior to publication, and a 15% share of the gross revenues from sales of the work. After Chodos finished the book, the publishing company decided not to publish the book, citing solely sales and marketing reasons. The appellate court held that the contract had given the publishing company the right in its discretion to terminate the relationship if it determined that the book was unacceptable. However, the publishing company had breached the contract. Specifically, the contract could not have been construed to allow the publishing company to consider solely the likelihood of the book's commercial success and other similar economic factors. Finally, the author was entitled to sue for restitution for the time and effort that he had reasonably invested in writing the book.
Can a publisher retain the right to reject an author's manuscript written pursuant to a standard industry agreement, even though the manuscript is of the quality contemplated by both parties?
An author attorney correctly noted that in order for a contract to be enforceable, it must impose binding obligations on each party. the California Supreme Court held that "if one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration." The author correctly argued that because the contract required him to produce a work of publishable quality, but allowed the publisher, in its discretion, to decide unilaterally whether or not to publish his work, the contract violated the doctrine of mutuality of obligation and was therefore illusory.