Can a court refuse to enforce a contract on the grounds that it is unconscionable?

Walker-Thomas Furniture Company sold household items on installment plans to Ora Lee Williams and William Thorne between 1957 and 1962. The contracts included a provision that maintained a balance on all items until full payment was made, allowing Walker-Thomas to repossess everything if a customer defaulted on any single item. Williams, a government assistance recipient supporting seven children on $218 monthly, purchased a $514.95 stereo set in 1962 when her outstanding balance was $164. She defaulted shortly after. Thorne acquired items valued at $391.10 in 1962 and also defaulted on payments.

Walker-Thomas sought to replevy all items purchased by both Williams and Thorne since their initial transactions with the company. This action was based on the contractual provision that kept a balance due on every item until all items were paid off, effectively allowing Walker-Thomas to reclaim all previously purchased goods in the event of a default on any single item.

Walker-Thomas Furniture Company initially brought suit against the appellants in the Court of General Sessions. The Court of General Sessions ruled in favor of Walker-Thomas Furniture Company. The appellants then appealed this decision to the District of Columbia Court of Appeals, which affirmed the lower court's judgment. Dissatisfied with this outcome, the appellants further appealed the case to the United States Court of Appeals for the District of Columbia Circuit.

(Wright, J.)

Yes. Courts have the power to refuse enforcement of contracts found to be unconscionable. This power stems from well-established common law principles and recent statutory developments. Unconscionability encompasses situations where one party lacks meaningful choice and the contract terms unreasonably favor the other party. Other jurisdictions have consistently held unconscionable contracts unenforceable as a matter of common law. The Supreme Court's decision in Scott v. United States (1870) explicitly stated that unreasonable and unconscionable contracts should not be enforced according to their letter, providing clear precedent for this principle. Furthermore, the recent enactment of the Uniform Commercial Code, which expressly allows courts to refuse enforcement of unconscionable contracts, offers persuasive authority and reflects evolving legal standards. This approach aligns with fundamental principles of contract law, which seek to balance freedom of contract with protection against exploitation. The doctrine of unconscionability serves as a crucial safeguard against oppressive and one-sided agreements, particularly in situations involving unequal bargaining power. By refusing to enforce unconscionable contracts, courts uphold basic notions of fairness and prevent the misuse of contractual relationships. This power is essential for maintaining the integrity of the contracting process and ensuring that agreements reflect genuine mutual assent rather than coercion or unfair advantage. The application of this principle requires careful consideration of the specific circumstances surrounding each contract, including the relative bargaining positions of the parties, the substance of the terms, and the commercial context in which the agreement was made.

Dissent (Danaher, J.) The court's decision to refuse enforcement of this contract based on unconscionability will have far-reaching and potentially detrimental effects on thousands of installment credit transactions. This ruling undermines the long-standing legal principle that parties should have great latitude in making their own contracts. By intervening in what has traditionally been a matter of private agreement, the court risks disrupting established business practices and creating uncertainty in commercial transactions. The concept of unconscionability as applied here is overly broad and may lead to inconsistent application in future cases, potentially stifling legitimate business activities and consumer choices.