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George Mason School of Law. Contracts I Introduction F.H. Buckley fbuckley@gmu.edu. George Mason School of Law. Makeup… Next day: Syllabus 2: Economic Gains from Trade. Some housekeeping. The exam: Open Code Optional upgrade based on classroom performance. 4.
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George Mason School of Law Contracts I Introduction F.H. Buckley fbuckley@gmu.edu
George Mason School of Law • Makeup… • Next day: • Syllabus 2: Economic Gains from Trade
Some housekeeping • The exam: Open Code • Optional upgrade based on classroom performance 4
Williams v. Walker-Thomas Furniture Co. District of Columbia Court of Appeals 198 A.2d 914 (1964)
Williams v. Walker-Thomas Furniture Co. District of Columbia Circuit Court of Appeals 350 F.2d 445 (1965)
Who was Ora Lee Williams? • If you had to describe her in one word, what would that word be?
Who brought the action? • What remedy was sought? • And who won at trial?
Who brought the action? • What remedy was sought? • Who won at the DC Court of Appeals?
Who brought the action? • What remedy was sought? • And who won in the DC Circuit?
What gave Walker-Thomas a right of replevin? • Title to remain in seller until all goods paid for • Walker-Thomas filed approximately 100 writs of replevin a year.
What gave Walker-Thomas a right of replevin? • Conditional Sale: (Title) (Possession) Vendor Purchaser
What gave Walker-Thomas a right of replevin? • UCC Article 9: (Security Interest) (Possession) Secured Party Debtor
Do we have a problem with this? Is secured lending a problem?
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
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
And if the debtor defaults? • In Williams v. Walker-Thomas, are we talking about a surplus or a deficiency?
What gave Walker-Thomas a right of replevin? • What was the “rather obscure clause” that permitted Walker-Thomas to repossess Mrs. Williams’ bed.
What gave Walker-Thomas a right of replevin? • How would you have drafted it?
What gave Walker-Thomas a right of replevin? • Do you think the Walker-Thomas lawyer was trying to hide the cross-collateral interest?
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)?
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.
After-acquired CollateralCurrent assets financing Inventory, Accounts receivable Security Interest
What gave Walker-Thomas a right of replevin? • Suppose Walker-Thomas had specified on the first loan five years earlier that money lent (or credit extended) subsequently (future advances) would be secured by assets acquired in the past?
What gave Walker-Thomas a right of replevin? • What about a security interest which secures moneys loaned subsequently (future advances)? • UCC 9-204(3) Obligations covered by a security agreement may include future advances or other value
What gave Walker-Thomas a right of replevin? • Future advances and line of credit loans Collateral Loan Loan
What gave Walker-Thomas a right of replevin? • But no longer if consumer goods or household goods, under the UCC • And why is that?
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….
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?
Substantive Unconscionability • Why did Walker-Thomas insert the clause in the contract?
Substantive Unconscionability • Why might Mrs. Williams rationally have agreed to it?
Substantive Unconscionability • How would you expect Walker-Thomas to react if the clause is banned?
Substantive vs. Procedural Unconscionability • What’s the difference?
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
Substantive Unconscionability • Substantive: Ban all consumer cross-collateral clauses
Procedural Unconscionability • Is there a problem of procedural unconscionability in Walker-Thomas?
Procedural Unconscionability • Is there a problem of procedural unconscionability in Walker-Thomas?
In the DC Circuit: Skelly Wright Where did he get the unconscionability doctrine from?
Why didn’t she shop at Woodward & Lothrop?10 blocks from Walker-Thomas
What happened to Walker-Thomas?1074 Seventh St. NW (at L) When did it go dark, do you think? 49
Seventh Street NW, April 5, 1968What happened the day before?