Williams v. Walker-Thomas Furniture Co.
350 F.2d 445 (D.C.Cir. 1965)
- Williams bought furniture from Walker-Thomas on credit.
- The contract contained a provision which stated that the balance will remain due on every item purchased until the balance due on all items, whenever purchases, was liquidated. In case of default of payment, all the furniture on which balance is due will be repossessed.
- So basically, if you made every payment except the last one, they took back the furniture, kept the money you paid them, and you got nothing!
- Williams bought several pieces of furniture between 1957 and 1962 and eventually defaulted on a payment for one item. Walker-Thomas sued to repossess (replevin) all the items purchased since 1957.
- William argued that the contract should be considered void because it was so one-sided that it was unconscionable.
- Under the terms of the contract, as long as Williams owed $1 on a single item, every single item, including the ones they’d completely paid for was still repossessable.
- This is known as an add-on or cross-collateral clause.
- Under a cross-collateral agreement, if you owe money on any one item, you owe money on all the items.
- The Trial Court found for Walker-Thomas. Williams appealed.
- The Trial Court found they didn’t have the power to deny enforcement of contracts on the basis that they are unconscionable.
- The Intermediate Appellate Court affirmed. Williams appealed.
- The Intermediate Appellate court found that although the contract clearly favored Walker, there was no fraud or misrepresentation.
- The Court noted that the fact that Williams had not even read the contract was irrelevant, since there is always a duty to read.
- The Appellate Court reversed and remanded for re-trial.
- The Appellate Court found that the courts can void contracts on the basis of unconscionability.
- The Court looked to Scott v. United States which said, “If a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to.”
- The Appellate Court didn’t throw out the contract, they just remanded to the Trial Court to let a jury decide if the contract should be thrown out or not.
- UCC §2-302 specifically provides that a court may refuse to enforce a contract which it finds to be unconscionable at the time it was made.