November 02, 2005
Let's Ask Alito What He Thinks of Williams v. Walker-Thomas Furniture Co.
Posted by Christine Hurt

At VC, David Bernstein mentions the "unconscionability" case as a barometer for student ideology and a point of reference for intra-class enforcement of social norms surrounding that ideology.  Do students in your class think the case was rightly decided or wrongly decided?  Do they turn on the minority viewpoint?

Interestingly, I remember very clearly the day in Contracts when we covered Walker-Thomas Furniture Company.  I did sense that a slim majority (Texas, 90-91)thought the case was rightly decided.  I welcomed the case as psychic relief from a string of cases where sympathetic plaintiffs were turned away by settled contract law -- loyal woman nurses high-maintenance, aging family member for years based on unfulfilled promise to leave farm in will, family leaves home and community to take long, expensive trip based on ambiguous promise of employment, etc.  However, our professor was clear to point out that the defense of unconscionability is not usually a winning trial strategy:  "unconscionability is the last resort of a fool."

That being said, I do remember that the case divided the class.  The case itself was not the dividing line so much as the hypotheticals that swirled under the guise of the Socratic Method.  I do not adhere to theories that the SM is hostile or dangerous, but on this day, the SM spun out to its stereotypical end -- the professor questioned the student (Bill) until Bill stuck to his guns and conceded that he would allow people to contract themselves into slavery and would allow courts to enforce that contract.  For the next 3 years, Bill was "the guy who thinks that people should be allowed to contract themselves into slavery."  FYI -- I think Bill enjoyed his reputation, though.

Coincidentally, I recently received a reprint of Russell Korobkin's A "Traditional" and "Behavioral" Law-and-Economics Approach to Williams v. Walker-Thomas Furniture.  I can't wait to see what Russell has to say on the matter.

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Comments (6)

1. Posted by Joshua Wright on November 2, 2005 @ 15:14 | Permalink

I used the polling feature on TWEN to ask my Contracts class some questions about Walker-Thomas this year.

Seventy percent of the class agreed with the proposition that the cross collaterization term should not be unconscionable if the resulting price/term combination makes buyers as a class better off than they would be in the absence of the term, even if the term imposes a hardship on a subset of defaulting buyers.

Of course, this does not address whether the case was correctly decided ... but I thought it would be interesting to share the results.

2. Posted by Christine on November 2, 2005 @ 15:45 | Permalink

The question is as interesting as the answers! I would think that the doctrine of unconscionability, however rarely used, speaks to the unfairness of a transaction based on the individuals involved. I would not think that unconscionability could be equated with "overall negative social utility" so that a specific transaction would be voided as unconscionable only if the transaction could be proved not to have an overall social utility. Hmmm. I remember going to law school before this whole L&E thing had spread so far!

3. Posted by Plainsman on November 2, 2005 @ 16:05 | Permalink

If we do take unconscionability to be a doctrine focused on the individual parties involved in a particular transaction, then Prof. Wright's poll suggests his students are using something like a subjective "bad motive" test for unconscionability in contract. Interesting.

In other words, a standard under which the seller could argue, "look, I didn't add this cross-collateralization provision because I want to impose harsh forfeitures on people like Ms. Williams; I added it because it is a reasonable, generally welfare-maximizing provision" -- and if accepted, this would bar a finding of unconscionability.

4. Posted by Scott Moss on November 2, 2005 @ 16:50 | Permalink

I assigned that Korobkin article -- Traditional & Behavioral Law & Ec Approach to Williams v Walker-Thomas -- to my Law & Economics class. Like Joshua, I used TWEN to poll the class -- but I asked the more general question, "Should the contract in Williams v. Walker-Thomas have been ruled invalid on unconscionability grounds?"

Of 18 students voting, 11 said "Yes" (i.e., agreed with the unconscionability ruling), 4 said "No" (i.e., disagreed with the ruling), and 3 said "Unsure/Undecided."

This was before our clsss discussion, which was pretty balanced.

I got the sense that some fairly libertarian students might have been taking this case as a "given" because they learned it as "the law" in contracts class, even though they might oppose other similarly anti-market rules. Perhaps "unconscionability" doctrine is like the New Deal: if it were up for a vote now, libertarian-leaning folks would vote against it -- but it seems too entenched to overturn now (cf. David Bernstein's tirade about Scalia being unwilling to stick to his originalist principles and overturn New Deal precedents). Maybe that's an example of law students exhibiting the endowment effect, or a status quo bias?

5. Posted by Joshua Wright on November 2, 2005 @ 17:04 | Permalink

Interesting results Scott.

My question too was inspired by Russell's article. The discussion in class was mostly concerned with the decision, and it is fair to say that the class was evenly split, so I thought I would try the TWEN feature to push harder on some normative questions regarding unconscionability.

Christine, doesn't evidence that this type of transaction helps rather than hurts similarly situted consumers speak to the fairness of the transaction to the party involved?

6. Posted by Christine on November 3, 2005 @ 9:35 | Permalink

Not to me, Josh, although I'm sure I'm in the minority in this crowd. I have never been very attracted to those sorts of arguments in the arena of usury, for example. In Texas, the usury limit for manufactured housing and used cars was over twice the normal limit. I never bought the "if lenders couldn't charge 28% interest for used car loans, then some people wouldn't be able to get used cars" argument.

OK, to use the stereotypical crazy Socratic hypo: Let's let people contract themselves into slavery. This could benefit similarly situated people: for example, homeless people. Come, be my slave, and you will always have a roof over your head, clothing, and food. Just sign here.

Maybe I should teach Contracts!

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