Day 04 2019.09.12
Saturday, September 7, 2019
10:58 PM
Unconscionable: (think unfair)
When one party to a contract takes advantage of the other due to unequal bargaining
positions, perhaps because of the disadvantaged party's recent trauma, physical infirmity,
ignorance, inability to read, or inability to understand the language. A contract will be
terminated as unconscionable if the unfairness is so severe that it is shocking to the average
person. This is aboue CHOICE
UCC §2-302
1. If the court as a matter of law find the contract (or any clause of it) unconscionable at the
time of the making, the court may refuse to enforce the contract, or may enforce the
remainder of the contract without the unconscionable clause, or it may limit the
application of such clause to avoid any unconscionable result.
a. A condition, goal and methods to achieve that goal is stated (3 ways)
2. When claimed or appear to the court that a contract (or any clause) may be
unconscionable, the parties shall be given reasonable opportunity to present evidence as
to the contract's commercial setting, purpose and effect to aid the court in making the
determination
a. When deemed or claimed a contract is unconscionable, the parties[?] will be given
opportunity to explain
3. Comment:
a. Intent of section is to give courts tools with which to police explicitly against
unconscionable contract or clause; test is 'in the light of general commercial
background and commercial needs (context) of the particular case/trade, clauses
are so one-sided to be unconscionable at the time at which contract was made.
b. The court may refuse the entire contract if the contract is permeated by the
unconscionability, OR may strike down clauses (or groups of them), OR it may simply
limit unconscionable clauses to avoid unconscionable (unfair) result
c. The evidence provided under (2) is for the court's use, NOT the judge's; what is
determined by the court's action on these matter will be presented to the jury.
Williams(Δ) v. Walker-Thomas Furniture Co (π). (1)
DC court of Appeals 1964
[]
Procedure: Complaint in replevin
1. Π sued Δ on a complaint in replevin, violation of sales contract
2. Trial court ruled for π, and π recovered some items sold to Δ
3. Δ appealed (court rules for π)
Facts:
1. Δ signed an alleged contract with π.
a. In extremely fine print, π held ownership of the all the items until all the payments
of installment on all the items were made.
2. Δ was undereducated and had seven children to support from government stipend
3. Π had full knowledge of π's financial situation but sold to π an item that amounts to ~2
times the amount of her month's stipend on
4. (Upon π's failure to maintain balance) Δ requested for complain in replevin
Issue:
1. Does a party have the duty to read the contract, either by self or someone who can
Contract 페이지 1
Replevin:
1. An action seeking
return of personal
property wrongfully
taken or held by the
defendant. Rules on
replevin actions vary
by jurisdiction.
Creditors use replevin
actions to recover
collateral when
debtors default on
secured loans. For
example, a bank might
file a replevin action
against a borrower to
repossess the
Issue:
1. Does a party have the duty to read the contract, either by self or someone who can
understand it?
2. Does this alleged contract of these natuer violates public policy, threfore unenforceable?
Holding:
1. Yes. Parties to an alleged contract has the duty to read the contract either by self or
someone else; therefore, a contract exists.
2. No; not under the DC state laws there are no public policy violation; therefore, a contract
exists.
Rules:
1. Holding 1, Precedent
a. Duty to read terms of the exists (Bob Wilson Inc v Swann, Hollywood Credit Clothing
Co. v Gibson). If you don't understand it, you must have someone who does read it
to you before signing (Stern v Moneyweight Scale)
2. When a seller engages in irresponsible business dealings, the conduct is not actionable in
DC law (1964)
Reasoning:
1. Holding-Rule 1
a. The Δ's failure to read the terms of the alleged contract does not render it
unenforceable; it was Δ's duty to read.
2. Holding-Rule 2
a. The seller's behavior was irresponsible. However, under DC law, there is "no ground
upon which this court can declare the contract in question contrary to public policy"
Note:
1. Δ testimony that the contract was signed blank and that she was undereducated does not
seem to have been noticed by the court
2. The court urged the state legislature to come up with laws to protect the public from such
exploitive contract.
3. Number 2 issue is the public policy argument
Williams(Δ) v. Walker-Thomas Furniture Co (π). (2)
US Court of Appeals, DC Curcuit 1965
[]
Procedure: Contract
1. Π sued Δ on a complaint in replevin, violation of sales contract
2. Trial court ruled for π, and π recovered some items sold to Δ
3. Δ appealed, state appellate court ruled for π
4. Δ appealed (motion to leave?)
Facts:
1. Δ signed an alleged contract with π.
a. In extremely fine print, π held ownership of the all the items until all the payments
of installment on all the items were made.
2. Δ was undereducated and had seven children to support from government stipend
3. Π had full knowledge of π's financial situation but sold to π an item that amounts to ~2
times the amount of her month's stipend on
4. (Upon π's failure to maintain balance) Δ requested for complain in replevin
Issue:
1. When there is the unconscionability in an alleged contract, is it a contract?
2. What standard is used to determine unconscionability?
3. What standard is used to determine meaningful choice by a contracting party?
Contract 페이지 2
file a replevin action
against a borrower to
repossess the
borrower's car after he
missed too many
payments. See Debtor
and Creditor Law.
3. What standard is used to determine meaningful choice by a contracting party?
4. What standard is used to determine reasonable and fair in meaningful choice?
Holding:
1. No, a set of promises is not a contract when unconscionability exist in the promises.
2. Specific to case: Case is remaded to determine for unconcsionability.
Rules:
1. Promises are not enforceable when unconscionabiliy exists in promises
a. Uncoscionability exists when agreement is made, manifest or not, meaningful
choice is absent to terms that are unreasaonably or unfair to one party.
i. "so extreme as to appear unconscionable accordnt to more and business
practice of the time and place"
ii. Meaningful choice is determined by looking at context. Examples include
1) Gross inequality of bargaining power
2) The manner in which promises were made
a) Reasonable opportunities to read and understand the promises?
iii. Reasonablity and fairness primarily concern with circumstances of contract in
light of the business setting, purpose and intent.
2. Under certain conditions, UCC adopted rules are applicable ex post of the time of incident
Reasoning(application):
1. Not much application, since court simply laid out standard for unconscionability and
remaded the case to the lower court to determine existence of unconscionability under
these standards.
2. Although UCC adopted the rules (1965) AFTER the case was decided by the lower court
(1964), this is nonetheless possible to apply this UCC code of unconscionability.
a. This is so because the UCC is the reflection of the common law (previous cases) that
existed at the time of the trial court decision.
b. Thus, the appellate court considers the cases cited in the UCC persuasive
Note:
1. Dissent:
a. Appeal should not have been remanded
b. There are many areas to public policy, and one is encouraging transaction
i. The Δ had full knoweldge of her position
ii. The π merely engaged in sharp practice: selling on credit to high risk buyers
with a degree of protection commensurate with the risk
c. The public policy at hand, issue of fair transaction, could serve as an impediment to
free transaction (contract law serving as the background, respecting autonomy and
greater utility)
2. In unconscionability, two sides exist:
a. Substantive: the substance of the contract itself; "unreasonable" so as to deprive a
party of the "essence of his bargain"
i. In this case, this would be the existence of the security clause itself; the effect
for Δ will determine. I don't think this was the problem in this case
b. Procedural: defective bargaining process, issue of notice and bargaining power. In
effect, includes practices "which impermissibly reduce an individual's ability to make
rational choices"
i. In this case, things might be relevant are Δ's lack of education, lack of
elasticity (though it's a stereo so dubious), miniscule writing and possible lack
of explanation of the terms.
3. Arguments from autonomy, utility and fairness sides:
a. Autonomy: it's the contract made by sides, so go with it UNLESS, some impediment
to autonomous exercise exists (oppression side might be bought). An autonomy
argument also may argue with efficiency in that impacting future autonomous
decision by buyer/seller in an undue way is bad
b. Efficiency: think beyond Mrs. Williams. What net welfare effect if 1. say clause itself
is unjust or 2. procedural enforcement.
i. Declaring clause unjust may result in less transaction, especially for those who
require credit buying and perhaps pay up later; or, it can result in grater price
of items (essentially the dissent) in contrast to the benefits conferred to her
Contract 페이지 3
of items (essentially the dissent) in contrast to the benefits conferred to her
and the potential buyers
ii. Similar; altered behavior in result, cost and benefit look
Contract 페이지 4