Regulating the Bargaining Process

• Author: J.H. Verkerke
• Pages: 73-154

V. Regulating the Bargaining

Process

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

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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.

I

Williams v. Walker-Thomas Furniture Co. I

District of Columbia Court of Appeals

198 A.2d 914 (1964)

QUINN, ASSOCIATE JUDGE.

[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.

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[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

her.

[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