Sabine Tsuruda’s article Race, Unconscionability, and Contractual Equality illustrates shortcomings of current unconscionability doctrine in contract law and proposes an alternative to enable the contract law to avoid complicity with beneficiaries of race discrimination in credit markets. Her proposed update to unconscionability doctrine, which she dubs a “best interests” approach, essentially makes a contract term substantively unconscionable if it runs contrary to a party’s “basic interests and inalienable rights” such as privacy, having a home, accessing justice, and being free from race and gender discrimination. (P. 206.)
Consistent with unconscionability’s roots in equity – and thus morality or fairness that justice requires –Tsuruda aims to “match unconscionability doctrine to the moral category of objectionable racial subordination.” (P. 192.) As such the article fits within unconscionability’s longstanding role of naming abuses of power that undermine the core assumptions that parties are free and equal. For example, the holding in the canonical unconscionability case of Williams v. Walker Thomas, 350 F.2d 445 (DC Cir 1965), led the drafters of the UCC and federal regulators to ban or sharply limit the blanket security interest that enabled the Walker Thomas Furniture Store to repossess Mrs. Williams’ bureau, bed, and stereo when they were nearly paid off. (UCC § 9-204 & Fed. Trade Comm’n Credit Practices Rule).
Race, Unconscionability, and Contractual Equality will change how I teach unconscionability, and also enrich the materials in the 3rd edition of the casebook that my coauthors and I are now editing. (Ertman, Houh, Sjostrom & Threedy, Contract Law (2nd ed. 2023 Foundation Press)). It also enriches my current writing project on reparations for racial injustice in real estate contracts by providing another doctrinal justification for the restitution-based remedy that I propose.
Race, Unconscionability, and Contractual Equality builds on Dylan Penningroth’s influential article Race in Contract Law, 170 U. Pa. L. Rev. 1199 (2022), extending his comprehensive account of African-Americans’ long history of deploying contract law to exercise agency in highly constrained circumstances of white supremacy. Like Penningroth, Tsuruda critiques the tendency of conventional pedagogy re: Williams v. Walker Thomas, 350 F.2d 445 (DC Cir 1965) to focus on impaired decision-making capacity as grounds to refuse to enforce a term or the entire contract. According to Tsuruda, instead of focusing on Ora Lee Williams’ 8th grade education and poverty, we ought to situate installment sales as an essential element of residential race segregation and racial wealth disparities by virtue of the way that these contracts put ownership – of goods or of a home – “just out of reach.” (P. 187.)
Tsuruda also contends that we should move away from worrying about whether contract law should prevent a mother of seven on public assistance to buy an expensive stereo on credit. Instead, she points out that Mrs. Williams may have rationally chosen this transaction to create a home that was “more than a mere shelter” and to enable the family “to bring music and other aspects of the broader culture into her home.” (P. 184.) In addition to honoring her decision-making capacity, Tsuruda would have us remember that other contracts in the past systemically shunted wealth to whites and away from African Americans through restrictive covenants, redlined mortgage lending, and installment contracts for residential real estate. To this day, lenders routinely extend more favorable terms to white than African-American borrowers.
Tsuruda’s solution is for contract law to recognize systemic bargaining disadvantages, many of which are creatures of earlier contracts and contract doctrine. Instead of taking refuge in unconscionability’s traditional refusal to “disturb the allocation of risks due to superior bargaining power,” (UCC § 2-302 Comment 1), Tsuruda’s improved unconscionability doctrine treats systemically constrained credit choices based on race as falling within the traditional categories of “overly harsh” and “unduly oppressive” terms that courts refuse to enforce on grounds of unconscionability. She explains the role of past installment contract sales in goods and real estate in creating and sustaining today’s tenfold racial wealth gap:
[They] created a set of authority relationships . . . that left [installment buyers] . . . basic interests – in having a home, being free of abject poverty, in maintaining personal and familial boundaries – dependent on the good will of their co-contractors.” (P. 205.)
That contract-created dependency, Tsuruda asserts, has a profound impact, far beyond the contracting parties or particular transactions. In her words, it is “emblematic and partially constitutive of the subordinate position [that installment buyers like Mrs. Williams] occupied in an unjust and racially stratified society.” (P. 205.) In doctrinal terms, therefore, those terms are unconscionable even if other sellers insist on the same unjust terms. The contracts are, in the language of unconscionability doctrine, so unsavory that contract law – and the courts that enforce it – ought to recoil from enforcing them.
Race, Unconscionability, and Contractual Equality concludes with a discussion of how the private law doctrine of unconscionability could and should evolve to reflect the changes she proposes based on the private dispute resolution context of arbitration. This discussion relies on caselaw from caselaw that interprets substantive unconscionability broadly, such as Dale v. Comcast, 498 F.3d 1216 (11th Cir. 1216) and Narayan v. The Ritz-Carleton Dev. Co., 400 P.3d 544 (Haw. 2017), which deems employment discrimination or condominium-purchase claims non-arbitrable. This view, which Tsuruda recognizes as a minority, reflects the logic of unconscionability caselaw in Canada and England on which she also relies.
The Federal Arbitration Act – especially Supreme Court caselaw since 2011 that strongly favors enforcement of arbitrability clauses – shapes unconscionability doctrine in the U.S. Tsuruda’s compelling material and reasoning points the way for unconscionability doctrine to evolve around that restriction. Race, Unconscionability, and Contractual Equality points the way for unconscionability to perform the essential equitable function of adapting to current understandings of unfairness by policing contracts that unreasonably favor one, powerful party, especially when that power is based on race.
