What Is an Adhesion Contract?

An adhesion contract is an agreement that usually has non-negotiable terms and conditions. Generally, it's prepared by a party to a potential transaction that ha🦩s the product or service sought by another party, the conཧsumer. The former has the stronger bargaining position. The latter must accept the adhesion contract to obtain the product or service.

Adhesion contracts are also known as standard, standardized, or 澳洲幸运5开奖号码历史查询:boilerplate contracts.

Understanding Adhesion Contracts

Adhesion contracts are often used for insurance, leases, vehicle purchases, mortgages, and other transactions where there is a high volume of cu💖stomers who fit a standard form of agreement.

For instance, with an 澳洲幸运5开奖号码历史查询:insurance contract, th❀🌠e company and its agent have the power to draft the contract, while the potential policyholder only has the right of refusal. In other words, the customer cannot counter the offer or create their own, new contract to which the insurer could agree. 

It is important for consumers to read an adhesion contract carefully, as all the information and rules have been written by the other party.

Contract Regulation

Adhesion contracts are usually enforceable in the United States according to the 澳洲幸运5开奖号码历史查询:Uniform Commercial Code (UCC). ✨The UCC helps to ensure that commercial transactions take place under a similar set of laws across the country.

Although the UCC is followed by most U.S. states, it has not been fully adopted by some jurisdictions such as American Samoa and Puerto Rico. Louisiana stands alone among the 50 states in adopting only parts of the UCC.

The UCC has specific provisions relating to adhesion contracts for the sale or lease of goods. Contracts of adhesion are, how🌳ever, subject to additional scrutiny and interpretation under state law.

History of Adhesion Contracts

Adhesion contracts started to become part of the U.S. legal system only after the Harvard Law Review published an article on life insurance contracts by Edwin W. Patterson in 1919. Subsequently, most courts accepted the idea of contract adhesion, due in large part to a Supreme Court of California case that supported adhesion analysis in 1962. 

The specifics of the legality and enforceability of adhe🐼sion contracts have changed over time. The case law and interpretation may vary from state to state, but it is generally agreed that adhesion contracts are an efficient way to handle standardized transactions.

When used properly,ಌ adhesion contracts save companies and customers time and the expense relating to obtaining contract advice from attorneys. However, soome aspects of adhesion contracts ꦍpose problems.

For example, in certain cases, electronic adhesion contracts signed online have been challenged in court because contract details were so difficult to access and review. As a result, electronic adhesion contracts must provide the accessibility of contracts that a consumer would receive and read offline.

Enforceability of Adhesion Contracts

For a contract to be treated as an adhesion contract, it must be presented as a "take it or leave it" deal. This means that one party has no ability to negotiate with the party offering the contract.

Adhesion contracts are subject to scru🐬tiny that usually comes in one of two forms:

Reasonable Expectations

Courts have traditionally used the doctrine of reasonable expectations to test whether an adhesion contract is enforceable. Under this doctrine, specific parts of an adhesion contract or the whole contract may be deemed unenforceable if the contract terms go beyond or don't match what the weaker party would have reasonably expected.

Whether a contﷺract is reasonable depends on the prominence of its terms, the purpose of the terms, and the circumstances surrounding acceptance of the contract.

Unconscionability

The doctrine of unconscionability has aཧlso been used in contract law to challenge certain adhesion contracts. It is a fact-specific doctrine arising from, again, equitable principles, and specifically, the idea of bargaining in good faith. Unconscionability shift♏s the focus from what the customer might reasonably expect to the motive of the supplier.

Unconscionability in adhesion contracts usually comes up if there is an absence of meaningful choice on the part of one party due to one-sided contract provisions combined with unreasonably oppressive terms that no one would or should accept.

Simply put, if the contract is exceptionally unfair to the signing party, it can be declared unenforceable in court.

Unconscionability is easier to argue if the supplier is making a significant profit from the agreement, especially if the amount of profit is tied to the weaker party's lack of bargaining power.

Some legal experts have pushed back on this approach as it has implications concerning the freedom of contract. That's the legal concept that people can freely determine the provisions of a contract without government interference.

The Bottom Line

Adhesion, or standardized, contracts🍰 require that one party to a transaction, e.g., the consumer who wishes to purchase a product or service, agree to all terms and conditions prepared by the other party to the transaction, e.g., the supplier of the product or service.

They are typical in many types of consumer transactions. Nonetheless, be sure to read the adhesion contract that's offered to you carefully before signing it.