Williams v. Walker-Thomas Furniture Co.

121 U.S. App. D.C. 315, 350 F.2d 445 (1965)

 

RULE:

Generally, if there is an element of unconscionability at the time a contract is made, then the contract should not be enforced.

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. The manner in which the contract was entered is also relevant to this consideration.

FACTS:

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 contract of sale 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.

On April 17, 1962, appellant Williams bought a stereo set of stated value of $514.95. She defaulted on her monthly payments and appellee sought to repossess all the items purchased since December, 1957. The Court of General Sessions granted judgment for appellee. The District of Columbia Court of Appeals affirmed. Appellant buyers appealed the judgment of the District of Columbia Court of Appeals.

ISSUE:

Can an contract be held unenforceable because of unconscionability?

ANSWER:

Yes.

CONCLUSION:

The Court held that Congress had enacted D.C. Code Ann. § 2-302 (Supp. 1965) of the Uniform Commercial Code and that a court had authority to refuse to enforce a contract found to be unconscionable at the time it was made, the court reviewed the contract to consider the contract's terms in light of the general commercial background and the commercial needs of the particular trade or case.

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. But when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms.

The court remanded the case, stating that the trial court could refuse to enforce a contract that it found to be unconscionable at the time it was made.

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