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26 U. Haw. L. Rev. 441 (2003-2004)
A Traditional and Behavioral Law-and-Economics Analysis of Williams v. Walker-Thomas Furniture Company

handle is hein.journals/uhawlr26 and id is 447 raw text is: A Traditional and Behavioral Law-and- Economics Analysis of Williams v. Walker- Thomas Furniture Company Russell Korobkin* ABSTRACT: Williams v. Walker-Thomas Furniture Co.' is a casebookfavorite, taught in vir- tually every first-year Contract Law class. In the case, the D.C. Circuit holds that courts have the power to deny enforcement of contract terms ifthe terms are unconscionable, and it remands the case to the lower court to consider whether the facts of the case meet this standard. This article analyzes the ques- tion that the D.C. Circuit posed to the lower court in Williams--and that Con- tracts teachers routinely pose to their students-from a traditional law-and- economics perspective, andfrom a behavioral law-and-economics perspec- tive. In 1962, Ora Lee Williams purchased a stereo set at the Walker-Thomas Furniture Company's retail store in Washington D.C. for a price of $514.95.2 Williams did not pay cash for the stereo, but instead signed a contract with the store promising to make installment payments. According to the pre-printed form contract, the store would retain title of the stereo until the full value had been paid.3 If Williams missed a payment before fully paying for the stereo, the store would have the right to repossess it.4 The contract also provided that each installment payment made by Williams would be credited on a pro rata basis to all outstanding debts that she owed the store, as had credit agreements she had signed with the store over the five previous years. The effect of the contract's cross-collateralization provision . Professor of Law, University of California, Los Angeles. This article was written for the Association of American Law Schools (AALS) Contracts Section's session at the 2004 AALS Annual Meeting. Helpful comments were provided by Dick Craswell, Jerry Kang, Kristen Madison, Mitch Polinsky, and Tom Ulen, as well as participants in the 2004 AALS Annual Meeting and in the Stanford Law School Law and Economics Workshop. Heather Richardson provided excellent research assistance. Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965). 2 Id. at 447. Williams' case was consolidated on appeal with the case of William Thorne, who purchased a Daveno, three tables and two lamps, for a total price of $391.10, from the same defendant at approximately the same time and who suffered the same fate as Williams. Id. 3Id. 4id. ' A cross-collateral clause is an installment-contract provision allowing the seller, if the buyer defaults, to repossess not only the particular item sold but also every other item bought

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