ANSWER TO COMPLAINT

         

 

SUN YAT-SEN UNIVERSITY SCHOOL OF LAW

NAME: ZHOU QI GUANG （周启光）

CLASS: FOUR

ID: 06355210

 

ON BEHALF OF:              AGAINST:

 

ORA LEE WILLIAMS        WALKER-THOMAS FURNITURE COMPANY

 

RESPONDENT           CLAIMANT

 

TABLE OF CONTENTS

 

STATEMENT OF FACTS…………………………………………………………..3

ISSUE: THE CONTRACTS ARE UNCONSCIONABLE AND NOT ENFORCEABLE………………………………………………………………………4

A. The contracts are substantive unconscionable………………………………..6

B. The contracts are procedural unconscionable………………………………….7

I. The respondent was incompetent to understand the meaning of the contract terms which is not for his own fault…………………………………7

a. The respondent was not one who should be expected to know the law or understand the meaning of complex and technical terms which is drafted by the professional lawyer……………………………………………………….8

b. The important terms were hidden in a maze of fine print and difficult to be noticed by Williams………………………………………………………..8

aa. Walker Thomas never attempted to call Williams’ attention to the unfavorable clause……………………………………………………………………………….8

bb. The important contract terms were hidden in the maze of fine print………………………………………………………………………………………………………9

II. The respondent that has no choice but to sign an unconscionable contract or not take the premises must be protected against the bad bargain she enters into…………………………………………………………………………10

 

STATEMENT OF FACTS

Claimant, Walker-Thomas Furniture Company, operates a retail furniture store in the District of Columbia.  During the period from 1957 to 1962 each appellant in these cases purchased a number of household items from Walker-Thomas, for which payment was to be made in installments.  The terms of each purchase were contained in a printed form contract which set forth the value of the purchased item and purported to lease the item to appellant for a stipulated monthly rent payment.  The contract then provided, in substance, that title would remain in Walker-Thomas until the total of all the monthly payments made equaled the stated value of the item, at which time appellants could take title.  In the event of a default in the payment of any monthly installment, Walker-Thomas could repossess the item.

The contract further provided that "the amount of each periodical installment payment to be made by [purchaser] to the Company under this present lease shall be inclusive of and not in addition to the amount of each installment [**2]  payment to be made by [purchaser] under such prior leases, bills or accounts; and all payments now and hereafter made by [purchaser] shall be credited pro rata on all outstanding leases, bills and accounts due the Company by [purchaser] at the time each such payment is made." Emphasis added.) The effect of this rather obscure provision was to keep a balance due on every item purchased until the balance due on all items, whenever purchased, was liquidated.  As a result, the debt incurred at the time of purchase of each item was secured by the right to repossess all the items previously purchased by the same purchaser, and each new item purchased automatically became subject to a security interest arising out of the previous dealings.

on April 17, 1962, respondent Williams bought a stereo set of stated value of $514.95.  She defaulted on her monthly payments thereafter, and claimant sought [**3]  to replevy all the items purchased since December, 1957. 

  At the time of this purchase Williams’s account showed a balance of $164 still owing from her prior purchases. The total of all the purchases made over the years in question came to $1,800.  The total payments amounted to $1,400.

  

ARGUMENT TO THE SUBSTANTIVE ISSUE

 

    The respondent strongly holds that the contracts are unconscionable and hence not enforceable.

  In Weaver v. American Oil Co, 257 Ind. 458,276 N.E.2d 144 Ind. 1971, the Supreme Court of Indiana stated:”the traditional contract is the result of free bargaining of parties who are brought together by the play of the market, and who meet each other on a footing of approximate economic equality. In such a society there is no danger that freedom of contract will be a threat to the social order as a whole. But in present-day commercial life the standardized mass contract has appeared. It is used primarily by enterprises with strong bargaining power and position. The weaker party, in need of the good or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses.” Furthermore, the United States Court of Appeals affirmed that:” the court has the power to refuse enforcement to contracts found to be unconscionable.”

  Traditionally , a bargain was said to be unconscionable in an action at law if it was “such as no man in his senses and not under delusion would make on the one hand , and as no honest and fair man aggrieved party was “equitably” entitled. Hume v. United States, 132 U.S. 406(1889), quoting Earl of Chesterfield v. Janssen, 2 Ves.Sen. 125, 155, 28 Eng. Reg. 82, 100(Ch.1750).Even though a contract was fully enforceable in an action for damages, equitable remedies such as specific performance were refused where “the sum  total of its provisions drives too hard a bargain for a court of conscience to assist.” Campbell Soup Co. v. Wentz, 172 F.2d 80, 84 (3d Cir. 1948). For contracts for the sale of goods , Uniform Commercial Code &2-302 states the rule of this section without distinction between law and equity. Comment 1 to that section adds, “The principle is one of the prevention of oppression and unfair surprise (Cf. Campbell Soup Co. v. Wentz,…) and not of disturbance of allocation of risks because of superior bargaining power.”

    In Williams v. Walker-Thomas Furniture Co. , 121 U.S. App.D.C. 315, 350 F.2d 445 (1965) the court found that unequal bargaining powers and the absence of a meaningful choice on the part of one of the parties, together with contract terms which unreasonably favor the other party, may spell out unconscionability. Especially, the court has stated the two elements of unconscionability : substantive and procedural unconscionability.

 

It will be demonstrated that the respondent is not liable for the breach of the contracts because these contracts are substantial unconscionable [A] as well as procedural unconscionable [B].

 

A. The contracts are substantive unconscionable.

   Any reasonable man will find the contracts are extreme unfariness and unconscionable: An exploitative merchant gets a welfare recipient to buy things she probably can’t afford and then uses a contract chock-full of incomprehensible legalese to take back all the merchandise when she misses a single payment.

   Walker-Thomas can make a lot of money by reselling the goods “sheets, curtains, rugs etc.” if he repossess all the items purchased since the first transaction in 1958. [RESPONDENT’S EXHIBIT NO.1] On the other hand, the respondent had paid a huge sum of money but only to get nothing when she misses a single payment on the premise that the contracts are to be enforceable. The respondent had to feed, clothe and support both herself and seven children on her $218 monthly from the government, but the claimant sold her a $514 stereo set. The contract term are so extreme as to appear unconscionable according to the mores and business practices of the time and place. [RESPONDENT’S EXHIBIT NO.2]

   Thus, exploitative clause are unreasonably favorable to Walker-Thomas, and, hence, substantive unconscionable.

 

B. The contracts are procedural unconscionable.

   According to common law, the procedural unconsionability is the absence of meaningful choice on the part of one of the parties. There are two reason that account for the absence of meaningful choice: firstly, one party is incompetent to comprehend the contract terms which is not for his own fault [I] ; secondly, a party with overwhelming bargaining power and the signer must agree to those terms or go without the commodity or service in question [II] .[ Weaver v. American Oil Co, 257 Ind. 458,276 N.E.2d 144 Ind. 1971]

 

I. The respondent was not incompetent to understand the meaning of the contract terms which is not for his own fault.

a. The respondent was not one who should be expected to know the law or understand the meaning of complex and technical terms which is drafted by the professional lawyer.

    Williams had left high school after one and a half years and spent his time working at various skilled and unskilled labor oriented jobs.[ RESPONDENT’S EXHIBIT NO.3] She was not one who should be expected to know the law or understand the meaning of technical terms. The adhesion contracts contain copious and complex terms of which even an educated person cannot fully understand the genuineness. It seems a deplorable abuse of justice to hold a woman of poor education, to a contract prepared by the attorneys of Walker-Thomas, for the benefit of Walker-Thomas.

b. The important terms were hidden in a maze of fine print and difficult to be noticed by Williams.

aa. Walker Thomas never attempted to call Williams’ attention to the unfavorable clause.

   The ceremonious activity of signing the contract consisted of nothing more than the agent of Walker-Thomas placing the contract in front of Williams and saying ‘sign’, which Miss Williams did. There is nothing in the record to indicate that the agent asked Williams to read it; or that the agent, in any manner, attempted to call Williams’ attention to the ‘replevy all the items’ clause in the contract. Each time Williams purchased a new household item, the procedure was the same. The evidence showed that the clauses in the contract were never explained to her in a manner from which she could grasp their legal significance.[ RESPONDENT’S EXHIBIT NO.4] The contracts were prepared by the attorneys of Walker-Thomas, for the Walker-Thomas Furniture Company, and the agents of the Walker-Thomas never attempted to explain the conditions of the contract nor did they advise Williams that she should consult legal counsel, before signing the contract.

 

bb. The important contract terms were hidden in the maze of fine print.

   According to Art.2-316(2) UCC, ‘… to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous…’ And according to Art.1-201(10) UCC, ‘A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals is conspicuous. Language in the body of a form is “conspicuous” if it is in larger or other contrasting type or color…’ Anyway, the contract hereof doesn’t contain a clause about warranty of merchantability, the’ UCC has established a significant principle that the unfavorable clause to the other party in the standard contract must be conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it.’[Seabrook v. Commuter Housing Co. , Inc. 72 Misc.2d 6, 338 N.Y.S.2d 67 , N.Y.City Civ.Ct. 1972] Unfortunately, the contract terms were in fine print instead of conspicuous print such as printed heading in capitals.[ RESPONDENT’S EXHIBIT NO.5]

    What’s more, the respondent was presented with a long complex contract, printed in small, practically illegible print. The contract contain hundreds of clauses. The contract is ten pages long and contains approximately ten thousand words. If typed on 118 1/2 paper , the contract would contain approximately fifty pages of highly technical legal terms, terms not commonly used or understood by the occasional purchaser. How can a consumer be expected to fully comprehend or intelligently execute a contract of this length? ‘An expert cannot hide behind legal clauses of this kind when dealing with an occasional purchaser that neither a knowledge of consumer law nor the advice of legal counsel. ‘[Seabrook v. Commuter Housing Co. , Inc. 72 Misc.2d 6, 338 N.Y.S.2d 67 , N.Y.City Civ.Ct. 1972]

 

II. The respondent that has no choice but to sign an unconscionable contract or not take the premises must be protected against the bad bargain she enters into.

  

  ‘ A bargain is not unconscionable merely because the parties to it are unequal in bargaining position, nor even because the inequality results in an allocation of risks to the weaker party. But gross inequality of bargaining power , together with terms unreasonably favorable to the stronger party, may confirm indications that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms.’[Art.&208,RESTATEMENT(SECOND)OFCONTRACTS,COMMENT(d)]

   The concept of laissez-faire , that is if the purchaser does not agree to contract of the seller he can go elsewhere, has no place in our enlightened society where ‘the weaker party, in need of the good or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses.’[Weaver v. American Oil Co, 257 Ind. 458,276 N.E.2d 144 Ind. 1971]

   The respondent was in great need of the stereo set which is her only and necessary instrument to make a living .[ RESPONDENT’S EXHIBIT NO.6] Williams has choice but to enter the unconscionable contract with Walker-Thomas who has the overwhelming bargaining power. Walker-Thomas has a monopoly of the commodities that the respondent needs frequently in the place where Williams stay.

 

By reason of the foregoing, the contracts are unconscionable and hence, not enforceable, so, Williams is not liable for breach of contract. We hereby request the court to reject the plaintiff’s action.

 ( signed ) ZHOUQIGUANG            16 September 2008

Counsel

 

ATTACHED:

RESPONDENT’S EXHIBIT NO.1

 

RESPONDENT’S EXHIBIT NO.2

 

RESPONDENT’S EXHIBIT NO.3

 

RESPONDENT’S EXHIBIT NO.4

 

RESPONDENT’S EXHIBIT NO.5

 

RESPONDENT’S EXHIBIT NO.6