ProfessorMelissa A. Hale
CaseCast™ – "What you need to know"
Brief Fact Summary. Appellants, who all purchased household items from Defendant Walker-Thomas furniture, alleged that the installment contracts that were entered into with Defendant were unconscionable and should therefore, be unenforceable.
Synopsis of Rule of Law. Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced.
The test is not simple, nor can it be mechanically applied.View Full Point of Law
Issue. Whether the contracts were unconscionable, and thus unenforceable, due to the boiler plate language on back of the installment contract.
Held. The Court held that where there is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to such party, such contract may be set aside. Meaningful choice can be determined by the equality of bargaining power and a reasonable understanding of contractual terms that each party has when entering into the contract. The Court remanded the case to determine whether, considering the lack of bargaining power held by Plaintiffs, coupled with the commercially unreasonable terms in the contract, the installment contract was so extreme as to appear unconscionable and render the contract unenforceable.
Dissent. Would hold that it was the province of the legislature, not the Courts, to determine when such contracts are unenforceable from a public policy perspective. Many low income clients purchase items on credit out of necessity, and it is not the Court’s role to determine when such contracts should be annulled.
Discussion. The case signifies that Courts may render a commercially unreasonable contract unenforceable when entered into between two parties of unequal bargaining power, especially where one party is commercially unsophisticated.