Jim Whitney

/ Economics 495

Case summary brief (2-page maximum)

Recorder name: / Natalie Naito
Case name: / Williams v. Walker-Thomas Furniture Co.
Citation; Date: / 350 F.2d 445 (1965)
Court: / US Court of Appeals for the District of Columbia
Name (if specified) and description of litigants at the original trial court level
Plaintiff: / Walker-Thomas Furniture Co.
Defendant: / Williams
Facts of the case:
The Walker-Thomas Furniture Co. sold household items to Williams for which she paid in installments. The terms of the contract were different than other similar contracts because each payment made was “credited pro rata,” or spread out in order to pay off every previous item purchased an equal amount. Normally items are paid off consecutively in the order they are purchased. Because of this different term, the furniture company can repossess all previous items that are not fully paid off because of a default in payments.
In April 1962 Williams bought a stereo for $514.95 while at the time she had a balance of $164 on her account. Her total purchases for the year totaled $1800, and her total payments for the year amounted to $1400. She defaulted shortly after she bought the stereo, and Walker-Thomas sought to repossess all of her purchases since December 1957.
Williams brought this suit because she argues her contract was unconscionable and therefore not enforceable. Walker-Thomas knew that Williams could not afford the stereo system and sold it to her anyways. The stereo contract had the name of Williams’ social worker and stated that she received a $218 monthly stipend. Walker-Thomas knew that Williams supported her and her seven children on this amount.
Procedural history (remedy sought, prior rulings, grounds for appeal, etc., as available):
The Court of General Sessions ruled in favor of Walker-Thomas. The DC Court of Appeals affirmed. Williams motioned for leave in order to appeal to this court.
Court opinion (key issues and arguments):
The original judge found that the court had no grounds to decide whether a retail transaction was conscionable and so could not break a contract because of irresponsible business practices. This court disagreed, finding that the court could make a contract not enforceable due to it being unconscionable because it was a type of fraud.
A contract is unconscionable if it “includes the absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonable favorable to the other party.” A contract may lack meaningful choice if there is uneven bargaining power between the two parties. A party with little bargaining power who cannot fully understand the terms of a one-sided bargain most likely doesn’t actually consent to the unfair terms.
Dissenting opinion, if any (key issues and arguments):
Disposition of case:
Remanded since the original court did not make judgment on the possible uncnscionability of the contract.

ANALYSIS OF THE CASE

1. Course topic of the case: / Enforcing Contracts
2. How does the case relate to the course topic?
This case shows that contracts with unconscionable terms are not enforceable.
3. Which previously assigned cases, if any, are related to this case, and how does this one differ?
Other cases that discuss enforcing contracts include Stambovsky v. Ackley, Laidlaw v. Organ, Sherwood v. Walker, and Alaska Packers Assn. v. Domenico. This case presents a different reason for making a contract unenforceable.
4. How does the case affect economic incentives and efficiency?
Not enforcing unconscionable contracts encourages fair and responsible business practices by deterring things like predatory lending that take advantage of poor people.