1 George Mason School of Law Contracts I Introduction F.H. Buckley [email protected].

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1 George Mason School of Law Contracts I Introduction F.H. Buckley [email protected] Slide 2 2 Some housekeeping LAW 102 (003), Thursdays 6:00 7:40 pm First part of a distinct two part series of courses on contract law 2 Slide 3 3 Some housekeeping Contracts I Theoretical Introduction Formation Relational Contracts 3 Slide 4 4 Some housekeeping Contracts II Why we shouldnt enforce: Fraud etc. Whats in the contract: Terms, Conditions Excuses: Mistake/Frustration Remedies 4 Slide 5 5 Some housekeeping The exam: Open Code Optional upgrade based on classroom performance Why I dont give practice exams 5 Slide 6 6 Some housekeeping The structure of the casebook 6 Slide 7 7 On learning with new technology Theres thing thing called Wikipedia GMU Library resources J for JSTOR InPrimo What this does (or should do) to teaching 7 Slide 8 8 On absorbing the material By verbalizing? Numbers, stories and pictures 8 Slide 9 9 The name of a case (case citation) Williams v. Walker-Thomas Furniture Co. Slide 10 10 Williams at 53 Williams v. Walker-Thomas Furniture Co. District of Columbia Court of Appeals 198 A.2d 914 (1964) Slide 11 11 The procedural aspect Who is suing? And what remedy is sought? Cf. Maitland on the forms of action Slide 12 12 How did it end up here? Williams v. Walker-Thomas Furniture Co. District of Columbia Circuit Court of Appeals 350 F.2d 445 (1965) Slide 13 13 Who was Ora Lee Williams? 13 Slide 14 14 Who was Ora Lee Williams? If you had to describe her in one word, what would that word be? Slide 15 15 Walker-Thomas Furniture Store 1074 Seventh St. NW (at L) 15 Slide 16 16 Williams v. Walker-Thomas 16 Slide 17 17 What gave Walker-Thomas a right of replevin? Slide 18 18 What gave Walker-Thomas a right of replevin? Title to remain in seller until all goods paid for Slide 19 19 What gave Walker-Thomas a right of replevin? Conditional Sale: (Title)(Possession) Vendor Purchaser Slide 20 20 What gave Walker-Thomas a right of replevin? UCC Article 9: (Security Interest) (Possession) Secured PartyDebtor Slide 21 21 What gave Walker-Thomas a right of replevin? Title to remain in seller until all goods paid for Does it matter that Walker-Thomas filed approximately 100 writs of replevin a year? Slide 22 22 Do we have a problem with this? Is secured lending a problem? Slide 23 23 Do we have a problem with this? Secured lending? UCC 9-201. General Validity of Security Agreement. Except as otherwise provided by this Act, a security agreement* is effective according to its terms between the parties, against purchasers of the collateral and against creditors. *A security agreement creates a security interest in collateral Slide 24 24 And if the debtor defaults? Slide 25 25 And if the debtor defaults? Slide 26 26 And if the debtor defaults? SP has the right to retake possession SP can resell and: Account to debtor for surplus if the resale price exceeds the indebtedness Sue for the deficiency if the resale price is less than the indebtedness Slide 27 27 And if the debtor defaults? In Williams v. Walker-Thomas, are we talking about a surplus or a deficiency? Slide 28 28 What gave Walker-Thomas a right of replevin? What was the rather obscure clause that permitted Walker-Thomas to repossess Mrs. Williams bed. Slide 29 29 What gave Walker-Thomas a right of replevin? How would you have drafted the clause? Slide 30 30 What gave Walker-Thomas a right of replevin? Suppose that, on the first loan, Walker- Thomas had taken a security interest in all the assets she acquired subsequently (from anyone)? Slide 31 31 What gave Walker-Thomas a right of replevin? Suppose Walker-Thomas had taken a security interest in all the assets she acquired subsequently (from anyone)? UCC 9-204: After-acquired property (A) a security agreement may create or provide for a security interest in after-acquired collateral. Slide 32 After-acquired Collateral Current assets financing Inventory, Accounts receivable 32 Security Interest Slide 33 33 What gave Walker-Thomas a right of replevin? But cf. 9-204(b)(1) A security interest does not attach under a term constituting an after-acquired property clause to consumer goods Why is that? Slide 34 34 Quinn on vitiating factors What is the difference between a lack of meeting of the minds andcontracts against public policy, per Quinn J. Slide 35 35 Substantive vs. Procedural Unconscionability No meeting of the minds a matter of procedural unconscionability But theres still a question of substantive unconscionability Slide 36 36 Substantive vs. Procedural Unconscionability Substantive: The clause is never enforceable, even if agreed to consciously by a person of full capacity Procedural: The clause is enforceable if agreed to consciously by a person of full capacity, but not otherwise Slide 37 37 Substantive Unconscionability Are there some bargains that are so vicious that they should be outlawed, even if the parties consent to them? How does one tell? Give me an example. Slide 38 38 Substantive Unconscionability Are there some bargains that are so vicious that they should be outlawed, even if the parties consent to them? Is Walker-Thomas an example of this? Slide 39 39 Recall UCC 9-204(b)(1) A security interest does not attach under a term constituting an after-acquired property clause to consumer goods Slide 40 40 Substantive Unconscionability Why did Walker-Thomas insert the clause in the contract? Can you think why Walker-Thomas might want a right to repossess five year old household junk? Slide 41 41 Substantive Unconscionability Aquinas on the just price Leff on Thomist Unconscionability Slide 42 42 Substantive Unconscionability When you say you are troubled by a contract, as a matter of public policy, just what have you said? Slide 43 43 Procedural Unconscionability and Williams Dont enforce if there is no meeting of the minds Slide 44 44 Procedural Unconscionability A meeting of the minds? Why might Mrs. Williams rationally have agreed to the clause? Slide 45 45 Procedural Unconscionability How would you expect Walker- Thomas to react if the clause is banned? Slide 46 46 So what kind of unconscionability are we talking about in Walker-Thomas? Slide 47 In the DC Circuit: Skelly Wright 47 Where did he get the unconscionability doctrine from? Slide 48 48 What do you infer from the subsequent adoption of UCC 2-302(1)? If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. Slide 49 49 Was there an absence of meaningful choice? Slide 50 50 Why didnt she shop at Woodward & Lothrop? 10 blocks from Walker-Thomas Slide 51 51 Or Garfinckels? 11 Blocks from Walker-Thomas Slide 52 52 What happened to Walker-Thomas? 1074 Seventh St. NW (at L) 52 When did it go dark, do you think? Slide 53 53 Seventh Street NW, April 5, 1968 What happened the day before? Slide 54 54 An absence of meaningful choice? To buy or not to buy? Slide 55 55 An absence of meaningful choice? Did it matter that she made the purchase in her house? Slide 56 56 Gross inequality of bargaining power Is the inequality greater when you purchase at Macys? Slide 57 57 Gross inequality of bargaining power 57 OMG!!! $12.99!!! I think we can do better than that, dont you? An absence of meaningful choice unless we can dicker? Slide 58 58 Gross inequality of bargaining power If there is inequality, how would you expect the merchant to exploit his power? Slide 59 59 Procedural Unconscionability Is her poverty relevant? Slide 60 60 Procedural Unconscionability Is her poverty relevant? You mean we let poor people enter into contracts!?! Slide 61 61 Procedural Unconscionability Do you want to argue that Mrs. Williams was a person of diminished capacity? Slide 62 62 Procedural Unconscionability Do you want to argue that Mrs. Williams was a person of diminished capacity? An obvious lack of education? Slide 63 63 Procedural Unconscionability Do you think, as an empirical matter, that all people stand on the same footing when it comes to bargaining ability or judgment? Slide 64 64 Procedural Unconscionability Do you think, as an empirical matter, that all people stand on the same footing when it comes to bargaining ability or judgment? And would legal consequences follow from this? Slide 65 65 Corrective and Distributive Justice How would you decide the case as a matter of corrective justice? Of distributive justice? Slide 66 66 Distributive Justice How would Aristotle allocate goods as a matter of distributive justice? Slide 67 67 Distributive Justice How would Aristotle allocate goods as a matter of distributive justice? And what is merit? Slide 68 68 Corrective Justice How would this apply in contract law? This kind of injustice being an inequality, the judge tries to equalize it; for in the case also in which one has received and the other has inflicted a wound, or one has slain and the other been slain, the suffering and the action have been unequally distributed; but the judge tries to equalize by means of the penalty, taking away from the gain of the assailant. Slide 69 69 Corrective Justice How would this apply in contract law? These names, both loss and gain, have come from voluntary exchange; for to have more than one's own is called gaining, and to have less than one's original share is called losing, e.g. in buying and selling and in all other matters in which the law has left people free to make their own terms; but when they get neither more nor less but just what belongs to themselves, they say that they have their own and that they neither lose nor gain. Therefore the just is intermediate between a sort of gain and a sort of loss, viz. those which are involuntary; it consists in having an equal amount before and after the transaction. Slide 70 70 Corrective Justice How would this apply in contract law? Suppose we abandon the idea of zero- sum transactions, and apply the idea of corrective justice to fraud or unconscionability? Slide 71 71 Did it matter what was purchased? 71 Slide 72 72 Did it matter what was purchased? 72 Suppose it had been a 10-year subscription to The New Republic? Slide 73 73 Did it matter what was purchased? 73 Man does not live by bread alone He also needs strawberry jam. Lionel Trilling Slide 74 74 Procedural Unconscionability Distinguish vices of capacity and vices of consent Slide 75 75 Procedural Unconscionability Did she give her consent to the clause? Slide 76 76 Procedural Unconscionability Did she give her consent to the clause? And just why is a meeting of the minds a big deal? Slide 77 77 Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? Slide 78 78 Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? If not, whats the point of them? Slide 79 79 Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? What if she was seen not to read the contract? Slide 80 80 Procedural Unconscionability Did she give her consent to the clause? Should consent be conclusively presumed if one signs a contract? What about that rather obscure clause? Slide 81 81 Procedural Unconscionability Did she give her consent to the clause? What about the size of the type? 4 point Slide 82 82 Standard Form Contracts Would Skelly Wright enforce any consumer contract based on a standard form? No objective manifestation of consent 82 Slide 83 83 Standard Form Contracts Why do vendors employ them? 83 Slide 84 84 The Seven Children Do they come into it? 84 Slide 85 85 What remedy was granted? What would have happened on remand? 85 Slide 86 86 Youre Walker-Thomas How do you react to the decision? 86 Slide 87 87 UCC 2-302: Does that clarify things? 2-302. Unconscionable contract or Clause. (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract 87 Slide 88 Forget Georgetown Alexandria 88 Slide 89 Best local club The Birchmere 89 Slide 90 Best Burgers Five Guys 90 Slide 91 Best Pho Eden Center, Wilson Bvld. At Seven Corners 91 Slide 92 Best Ethiopian Bati on George Mason off King Street 92 Slide 93 Best Felafel Busboys and Poets in Shirlington 93 Slide 94 National Arboretum 94 Slide 95 Arlington Library Three blocks west 95 Slide 96 The principal tourist attraction Behind the Jefferson Memorial 96 Slide 97 97 The next best tourist attraction 1074 Seventh St. NW (at L) 97