Regulating the Bargaining Process

AuthorJ.H. Verkerke
V. Regulating the Bargaining
1. Unconscionability
Consider for a moment what might justify using the coercive power
of the state to enforce private promises. From a moral perspective, we might
think that choosing to make a promise creates a duty to perform. Imagine
that Cheryl promises Albert that she will prepare his tax return in exchange
for $200. The promisor Cheryl exercises her autonomy to establish a new
relationship in which the promisee Albert can rely on her promise and adjust
his plans accordingly. We show respect for the autonomy of both parties by
enforcing the promise. Enforcement enables Cheryl to bind herself to
perform if she chooses to do so. At the same time, enforcement respects
Albert’s autonomy by protecting his reliance on Cheryl’s promise.
An alternative economic or “instrumental” approach to enforcement
also focuses on the parties’ choices and reliance. From an economic
perspective, one goal of promise making is mutually beneficial trade. People
make promises to enable others to rely. Promises also allow parties to trade
risks. Thus, Cheryl assumes the risk that the market price for tax preparation
will rise or that she will find it inconvenient or difficult to fulfill her promise
to complete Albert’s tax return by the filing deadline. At the same time,
Albert accepts the risk that someone else will offer to do his taxes for less or
that he would prefer to prepare the return himself. Each party faces a
different bundle of risks than he or she did before making or receiving the
promise. On this account, the purpose of promissory enforcement is to
maximize the social benefits that flow from these exchanges of risk.
Both justifications for enforcement have in common the assumption
that parties make promises and enter into bargains voluntarily. It follows that
if Cheryl holds a gun to Albert’s head and forces him to contract for her
services, then Albert should be free to disavow the deal and use H&R Block
instead. More difficult and subtle questions arise when a promisor claims that
she lacked essential information about the terms of a bargain or that she was
for some other reason unable to exercise a meaningful choice. Even more
controversial are claims that the terms of the deal are so unfavorable that a
court should simply refuse to enforce them.
The two opinions in the following case address some of these issues.
1.1. Principal Case Williams v. Walker-Thomas Furniture Co.
Williams v. Walker-Thomas Furniture Co. I
District of Columbia Court of Appeals
198 A.2d 914 (1964)
[1] Appellant, a person of limited education separated from
her husband, is maintaining herself and her seven children by means of
public assistance. During the period 1957-1962 she had a continuous
course of dealings with appellee from which she purchased many
household articles on the installment plan. These included sheets,
curtains, rugs, chairs, a chest of drawers, beds, mattresses, a washing
machine, and a stereo set. In 1963 appellee filed a complaint in replevin
for possession of all the items purchased by appellant, alleging that her
payments were in default and that it retained title to the goods according
to the sales contracts. By the writ of replevin appellee obtained a bed,
chest of drawers, washing machine, and the stereo set. After hearing
testimony and examining the contracts, the trial court entered judgment
for appellee.
[2] Appellant's principal contentions on appeal are (1) there
was a lack of meeting of the minds, and (2) the contracts were against
public policy.
[3] Appellant signed fourteen contracts in all. They were
approximately six inches in length and each contained a long paragraph
in extremely fine print. One of the sentences in this paragraph provided
that payments, after the first purchase, were to be prorated on all
purchases then outstanding. Mathematically, this had the effect of
keeping a balance due on all items until the time balance was completely
eliminated. It meant that title to the first purchase, remained in appellee
until the fourteenth purchase, made some five years later, was fully paid.
[4] At trial appellant testified that she understood the
agreements to mean that when payments on the running account were
sufficient to balance the amount due on an individual item, the item
became hers. She testified that most of the purchases were made at her
home; that the contracts were signed in blank; that she did not read the
instruments; and that she was not provided with a copy. She admitted,
however, that she did not ask anyone to read or explain the contracts to
[5] We have stated that “one who refrains from reading a
contract and in conscious ignorance of its terms voluntarily assents
thereto will not be relieved from his bad bargain.” Bob Wilson, Inc. v.
Swann, D.C.Mun.App., 168 A.2d 198, 199 (1961). “One who signs a
contract has a duty to read it and is obligated according to its terms.”
Hollywood Credit Clothing Co. v. Gibson, D.C.App., 188 A.2d 348, 349
(1963). “It is as much the duty of a person who cannot read the language
in which a contract is written to have someone read it to him before he
signs it, as it is the duty of one who can read to peruse it himself before
signing it.” Stern v. Moneyweight Scale Co., 42 App.D.C. 162, 165 (1914).
[6] A careful review of the record shows that appellant's
assent was not obtained “by fraud or even misrepresentation falling short
of fraud.” Hollywood Credit Clothing Co. v. Gibson, supra. This is not a case of
mutual misunderstanding but a unilateral mistake. Under these
circumstances, appellant's first contention is without merit.
[7] Appellant's second argument presents a more serious
question. The record reveals that prior to the last purchase appellant had
reduced the balance in her account to $164. The last purchase, a stereo
set, raised the balance due to $678. Significantly, at the time of this and
the preceding purchases, appellee was aware of appellant's financial
position. The reverse side of the stereo contract listed the name of
appellant's social worker and her $218 monthly stipend from the
government. Nevertheless, with full knowledge that appellant had to
feed, clothe and support both herself and seven children on this amount,
appellee sold her a $514 stereo set.
[8] We cannot condemn too strongly appellee's conduct. It
raises serious questions of sharp practice and irresponsible business

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT