Williams v. Walker-Thomas Furniture Co

Case brief: template

Case name:	Williams v. Walker-Thomas Furniture Co.
Court:	UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Citation; Date:	350 F.2d 445 (1965)

PROCEDURAL HISTORY
Trial court:		Appeal court (for appeal cases only):
Plaintiff:	Walker-Thomas Furniture Co.	Appellant:	Williams - customer
Defendant:	Williams - customer	Respondent:	Walker-Thomas Furniture Co.

Facts of the case:
Appellee, Walker-Thomas Furniture Company, operates a retail furniture store in the District of Columbia. During the period from 1957 to 1962 each appellant in these cases purchased a number of household items from Walker-Thomas, for which payment was to be made in installments. The terms of each purchase were contained in a printed form contract which set forth the value of the purchased item and purported to lease the item to appellant for a stipulated monthly rent payment. The contract then provided, in substance, that title would remain in Walker-Thomas until the total of all the monthly payments made equaled the stated value of the item, at which time appellants could take title. In the event of a default in the payment of any monthly installment, Walker-Thomas could repossess the item. The contract further provided that "the amount of each periodical installment payment to be made by [purchaser] to the Company under this present lease shall be inclusive of and not in addition to the amount of each installment payment to be made by [purchaser] under such prior leases, bills or accounts; and all payments now and hereafter made by [purchaser] shall be credited pro rata on all outstanding leases, bills and accounts due the Company by [purchaser] at the time each such payment is made." . . . [T]he effect of this rather obscure provision was to keep a balance due on every item purchased until the balance due on all items, whenever purchased, was liquidated. As a result, the debt incurred at the time of purchase of each item was secured by the right to repossess all the items previously purchased by the same purchaser, and each new item purchased automatically became subject to a security interest arising out of the previous dealings. [O]n April 17, 1962, appellant Williams bought a stereo set of stated value of $514.95. {At the time of this purchase her account showed a balance of $164 still owing from her prior purchases. The total of all the purchases made over the years in question came to $1,800. The total payments amounted to $1,400.} She . . . defaulted shortly thereafter

Remedy sought:	appellee sought to replevy all the items purchased since December 1957.

Court opinion (including key issues and arguments):
The Court of General Sessions granted judgment for appellee. The District of Columbia Court of Appeals affirmed, and we granted appellants' motion for leave to appeal to this court. Appellants' principal contention, rejected by both the trial and the appellate courts below, is that these contracts, or at least some of them, are unconscionable and, hence, not enforceable. district court: "at the time of this and the preceding purchases, appellee was aware of appellant's financial position. The reverse side of the stereo contract listed the name of appellant's social worker and her $218 monthly stipend from the government. Nevertheless, with full knowledge that appellant had to feed, clothe and support both herself and seven children on this amount, appellee sold her a $514 stereo set." "We cannot condemn too strongly appellee's conduct. It raises serious questions of sharp practice and irresponsible business dealings. A review of the legislation in the District of Columbia affecting retail sales and the pertinent decisions of the highest court in this jurisdiction disclose, however, no ground upon which this court can declare the contracts in question contrary to public policy. We note that were the Maryland Retail Installment Sales Act . . . or its equivalent, in force in the District of Columbia, we could grant appellant appropriate relief. We think Congress should consider corrective legislation to protect the public from such exploitive contracts as were utilized in the case at bar." We do not agree that the court lacked the power to refuse enforcement to contracts found to be unconscionable. In other jurisdictions, it has been held as a matter of common law that unconscionable contracts are not enforceable . . . Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Whether a meaningful choice is present in a particular case can only be determined by consideration of all the circumstances surrounding the transaction. In many cases the meaningfulness of the choice is negated by a gross inequality of bargaining power. {. . . Inquiry into the relative bargaining power of the two parties is not an inquiry wholly divorced from the general question of unconscionability, since a one-sided bargain is itself evidence of the inequality of the bargaining parties. This fact was vaguely recognized in the common law doctrine of intrinsic fraud, that is, fraud which can be presumed from the grossly unfair nature of the terms of the contract. See the oft-quoted statement of Lord Hardwicke in Earl of Chesterfield v. Janssen . . . ". . . [Fraud] may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make . . . " Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain.

Disposition of case:

ECONOMIC ANALYSIS OF THE CASE

Efficiency/incentive issues discussed in the court opinion:

dissent: "appellant seems to have known precisely where she stood"

Other efficiency/incentive issues relevant to the case:

P117: could hurt the poor ex ante, but may offset welfare laws which encourage risky borrowing

Assessment of the economic consequences of the court decision:

    Case 9. Formation Defense of Unconscionability
    Williams v. Walker-Thomas Furniture Co.: COMMENTS AND QUESTIONS
    1. As a term to classify behavior, "unconscionable" has weaknesses. It appears in the present context to suggest but not to state something like fraud. Or maybe it is a term introduced by a paternalistic court to undo a contract involving a party that the court thought to be unable to understand what she was doing.
    2. Would Ms. Williams have had a good chance to furnish her home in the absence of the kind of contract she was able to get through Walker-Thomas? Would Walker-Thomas have made insecure loans to so poor a person as Ms. Williams? If not, was the contract one-sided or unfair?