Williams v. Walker-Thomas Furniture Co.

United States Court of Appeals for the District of Columbia Circuit · 1965 · Contracts

Contractsunconscionabilityadhesion contractcross-collateralizationWrightunconscionabilitymeaningful choicegross inequality of bargaining power

Facts

Walker-Thomas sold household goods to the appellants over several years under printed form installment contracts that purported to lease each item until the total payments equaled the item's stated value. The contracts provided that all payments would be credited pro rata across all outstanding purchases, with the effect that no item was fully paid off until all items were paid off and default on any installment exposed all purchased goods to repossession. After each appellant made a new purchase in 1962 and then defaulted shortly thereafter, Walker-Thomas sought to replevy all goods bought since the first transactions. The buyers argued that these contracts, or some of them, were unconscionable and therefore unenforceable.

Issue

May a court refuse to enforce a contract on the ground that it was unconscionable at the time it was made? If so, should these installment contracts be enforced without findings on whether the buyers lacked meaningful choice and whether the terms were unreasonably favorable to the seller?

Rule

Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced. Unconscionability generally includes an absence of meaningful choice on the part of one party together with contract terms unreasonably favorable to the other party, judged in light of all the circumstances and the commercial background existing when the contract was made.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Baltimore, Linton Home Goods sued Marisol Vega to enforce a printed installment contract for appliances after she missed two payments. The trial judge agreed the terms looked oppressive but ruled that, because no statute expressly authorized relief, the court had to enforce the contract as written.

On appeal, what is the strongest argument for Marisol?

Explanation. The majority held that courts have common-law power to refuse enforcement of unconscionable contracts and that a contract should not be enforced where unconscionability is present at the time it is made. The opinion rejected the view that only legislation could supply a remedy. Fraud is not required, and later statutory enactments may be persuasive without being the exclusive source of authority. (Derived from Williams v. Walker-Thomas Furniture Co. (1965).)