George Mason School of Law Contracts I Introduction F.H. Buckley fbuckley@gmu.edu

Some housekeeping LAW 102 (003), Thursdays 6:00 – 7:40 pm First part of a distinct two part series of courses on contract law 2

Some housekeeping Contracts I Theoretical Introduction Formation Relational Contracts 3

Some housekeeping Contracts II Why we shouldn’t enforce: Fraud etc. What’s in the contract: Terms, Conditions Excuses: Mistake/Frustration Remedies 4

Some housekeeping The exam: Open Code Optional upgrade based on classroom performance Why I don’t give practice exams 5

Some housekeeping The structure of the casebook 6

On learning with new technology There’s thing thing called Wikipedia GMU Library resources J for JSTOR InPrimo What this does (or should do) to teaching 7

On absorbing the material By verbalizing? Numbers, stories and pictures 8

The name of a case (case citation) Williams v. Walker-Thomas Furniture Co.

Williams at 53 Williams v. Walker-Thomas Furniture Co. District of Columbia Court of Appeals 198 A.2d 914 (1964)

The procedural aspect Who is suing? And what remedy is sought? Cf. Maitland on the forms of action

How did it end up here? Williams v. Walker-Thomas Furniture Co. District of Columbia Circuit Court of Appeals 350 F.2d 445 (1965)

Who was Ora Lee Williams? 13

Who was Ora Lee Williams? If you had to describe her in one word, what would that word be?

Walker-Thomas Furniture Store 1074 Seventh St. NW (at L) 15

Williams v. Walker-Thomas 16

What gave Walker-Thomas a right of replevin?

What gave Walker-Thomas a right of replevin? Title to remain in seller until all goods paid for

What gave Walker-Thomas a right of replevin? Conditional Sale: (Title) (Possession) Vendor Purchaser

What gave Walker-Thomas a right of replevin? UCC Article 9: (Security Interest) (Possession) Secured Party Debtor

What gave Walker-Thomas a right of replevin? Title to remain in seller until all goods paid for Does it matter that Walker-Thomas filed approximately 100 writs of replevin a year?

Do we have a problem with this? Is secured lending a problem?

Do we have a problem with this? Secured lending? UCC 9-201. General Validity of Security Agreement. Except as otherwise provided by this Act, a security agreement* is effective according to its terms between the parties, against purchasers of the collateral and against creditors. *A security agreement creates a security interest in collateral

And if the debtor defaults?

And if the debtor defaults?

And if the debtor defaults? SP has the right to retake possession SP can resell and: Account to debtor for surplus if the resale price exceeds the indebtedness Sue for the deficiency if the resale price is less than the indebtedness

And if the debtor defaults? In Williams v. Walker-Thomas, are we talking about a surplus or a deficiency?

What gave Walker-Thomas a right of replevin? What was the “rather obscure clause” that permitted Walker-Thomas to repossess Mrs. Williams’ bed.

What gave Walker-Thomas a right of replevin? How would you have drafted the clause?

What gave Walker-Thomas a right of replevin? Suppose that, on the first loan, Walker-Thomas had taken a security interest in all the assets she acquired subsequently (from anyone)?

What gave Walker-Thomas a right of replevin? Suppose Walker-Thomas had taken a security interest in all the assets she acquired subsequently (from anyone)? UCC 9-204: After-acquired property (A)  … a security agreement may create or provide for a security interest in after-acquired collateral. 

After-acquired Collateral Current assets financing Inventory, Accounts receivable Security Interest

What gave Walker-Thomas a right of replevin? But cf. 9-204(b)(1) A security interest does not attach under a term constituting an after-acquired property clause to consumer goods Why is that?

Quinn on vitiating factors What is the difference between “a lack of meeting of the minds” and “contracts against public policy,” per Quinn J.

Substantive vs. Procedural Unconscionability No “meeting of the minds” a matter of procedural unconscionability But there’s still a question of substantive unconscionability

Substantive vs. Procedural Unconscionability Substantive: The clause is never enforceable, even if agreed to consciously by a person of full capacity Procedural: The clause is enforceable if agreed to consciously by a person of full capacity, but not otherwise

Substantive Unconscionability Are there some bargains that are so vicious that they should be outlawed, even if the parties consent to them? How does one tell? Give me an example….

Substantive Unconscionability Are there some bargains that are so vicious that they should be outlawed, even if the parties consent to them? Is Walker-Thomas an example of this?

Recall UCC § 9-204(b)(1) A security interest does not attach under a term constituting an after-acquired property clause to consumer goods

Substantive Unconscionability Why did Walker-Thomas insert the clause in the contract? Can you think why Walker-Thomas might want a right to repossess five year old household junk?

Substantive Unconscionability Aquinas on the just price Leff on “Thomist Unconscionability”

Substantive Unconscionability When you say you are troubled by a contract, as a matter of public policy, just what have you said?

Procedural Unconscionability and Williams Don’t enforce if there is no “meeting of the minds”

Procedural Unconscionability A meeting of the minds? Why might Mrs. Williams rationally have agreed to the clause?

Procedural Unconscionability How would you expect Walker-Thomas to react if the clause is banned?

So what kind of unconscionability are we talking about in Walker-Thomas?

In the DC Circuit: Skelly Wright Where did he get the unconscionability doctrine from?

What do you infer from the subsequent adoption of UCC § 2-302(1)? If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

Was there an “absence of meaningful choice”?

Why didn’t she shop at Woodward & Lothrop? 10 blocks from Walker-Thomas

Or Garfinckel’s? 11 Blocks from Walker-Thomas

What happened to Walker-Thomas? 1074 Seventh St. NW (at L) When did it go dark, do you think? 52

Seventh Street NW, April 5, 1968 What happened the day before?

An “absence of meaningful choice”? To buy or not to buy?

An “absence of meaningful choice”? Did it matter that she made the purchase in her house?

“Gross inequality of bargaining power” Is the inequality greater when you purchase at Macy’s?

“Gross inequality of bargaining power” OMG!!! $12.99!!! I think we can do better than that, don’t you? “An absence of meaningful choice” unless we can dicker? 57

“Gross inequality of bargaining power” If there is inequality, how would you expect the merchant to exploit his power?

Procedural Unconscionability Is her poverty relevant?

Procedural Unconscionability Is her poverty relevant? You mean we let poor people enter into contracts!?!

Procedural Unconscionability Do you want to argue that Mrs. Williams was a person of diminished capacity?

Procedural Unconscionability Do you want to argue that Mrs. Williams was a person of diminished capacity? An “obvious … lack of education”?

Procedural Unconscionability Do you think, as an empirical matter, that all people stand on the same footing when it comes to bargaining ability or judgment?

Procedural Unconscionability Do you think, as an empirical matter, that all people stand on the same footing when it comes to bargaining ability or judgment? And would legal consequences follow from this?

Corrective and Distributive Justice How would you decide the case as a matter of corrective justice? Of distributive justice?

Distributive Justice How would Aristotle allocate goods as a matter of distributive justice?

Distributive Justice How would Aristotle allocate goods as a matter of distributive justice? And what is merit?

Corrective Justice How would this apply in contract law? This kind of injustice being an inequality, the judge tries to equalize it; for in the case also in which one has received and the other has inflicted a wound, or one has slain and the other been slain, the suffering and the action have been unequally distributed; but the judge tries to equalize by means of the penalty, taking away from the gain of the assailant….

Corrective Justice How would this apply in contract law? These names, both loss and gain, have come from voluntary exchange; for to have more than one's own is called gaining, and to have less than one's original share is called losing, e.g. in buying and selling and in all other matters in which the law has left people free to make their own terms; but when they get neither more nor less but just what belongs to themselves, they say that they have their own and that they neither lose nor gain. Therefore the just is intermediate between a sort of gain and a sort of loss, viz. those which are involuntary; it consists in having an equal amount before and after the transaction.

Corrective Justice How would this apply in contract law? Suppose we abandon the idea of zero-sum transactions, and apply the idea of corrective justice to fraud or unconscionability?

Did it matter what was purchased? 71

Did it matter what was purchased? Suppose it had been a 10-year subscription to The New Republic? 72

Did it matter what was purchased? “Man does not live by bread alone… He also needs strawberry jam.” Lionel Trilling 73

Procedural Unconscionability Distinguish vices of capacity and vices of consent

Procedural Unconscionability Did she give her consent to the clause?

Procedural Unconscionability Did she give her consent to the clause? And just why is a meeting of the minds a big deal?

Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract?

Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? If not, what’s the point of them?

Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? What if she was seen not to read the contract?

Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? What about that “rather obscure clause”?

Procedural Unconscionability Did she give her consent to the clause? What about the size of the type? 4 point

Standard Form Contracts Would Skelly Wright enforce any consumer contract based on a standard form? No “objective manifestation of consent” 82

Standard Form Contracts Why do vendors employ them? 83

The Seven Children Do they come into it? 84

What remedy was granted? What would have happened on remand? 85

You’re Walker-Thomas How do you react to the decision? 86

UCC 2-302: Does that clarify things? § 2-302. Unconscionable contract or Clause. (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract… 87

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The next best tourist attraction 1074 Seventh St. NW (at L) 97