Adhesion Contract - Explained
What is an Adhesion Contract?
Written by Jason Gordon
Updated at September 24th, 2021
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Table of Contents
What is an Adhesion Contract?A Little More on What is an Adhesion ContractExample of adhesion contractsLimitation of Adhesion ContractAcademic ResearchWhat is an Adhesion Contract?
An adhesion contract is defined as a one-sided, "take-it-or-leave-it" contract drafted by one party and then signed by another. The party writing the contract usually has more bargaining power than the one signing. The signing party has only two options: accepting the contract or reject it - there is no room for negotiation of the terms. This contract is also known as a "boilerplate" contract or a "standard form" contract.
Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY
How Does an Adhesion Contract Work?
For an adhesion contract to be valid, it must meet the following requirements:
- The contract must include all the consumer's data and be signed by them.
- It should include the governing clauses within the document.
- It should exclude any clauses that could be deemed abusive under law or equity.
Example of Adhesion Contracts
Some famous examples include the contracts for the provision of public services like water and electricity. Banks and insurance companies also routinely employ these type of contracts, but sometimes it's possible that the contracts are entered into between individuals. What makes this contract a controversial one is one of the parties cannot negotiate the terms of the agreement. This leads to inequality between the parties, and this is the reason why sometimes there are abusive clauses in the contract.
Limitation of Adhesion Contract
Legal limitations: There are two of them. One is that the voluntary act cannot transgress the law and the other is that the contract cannot disregard the rights that are declared inalienable by the law. Protection of the legitimate rights of a third party: The legitimacy or illegitimacy of these rights depends on whether it is in good faith. This corresponds to whether the third party ignores or knows the unlawful situation that might occur against him. In this type of contract, an offer is made by one party, and it contains all the elements of the contract. Since this contract does not accept discussions, the other party either accepts or rejects the contract. However, adherence to a contract already entered by other parties should not be confused with accession contracts. Adhesion contracts possess protection measures on consumers. These type of contracts may also exist between companies. Since the consumer is the recipient of the service, the abusive clauses are defined by consumer law.
Related Topics
- What is a Contract?
- Sources of contract law?
- Unilateral Contract vs a Bilateral Contract?
- Express Contract vs an Implied Contract?
- Offer, Acceptance, Consideration?
- Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Mental Capacity to contract?
- Requirement of a Lawful Purpose?
- Common types of Voidable Contract?
Academic Research
- Adhesion Contracts in the Conflict of Laws, Ehrenzweig, A. A. (1953). Colum L. Rev., 53, 1072. This paper investigates how adhesion contracts conflict with the law. It uses past case studies to further elaborate on the issue.
- Consumer Credit by Adhesion Contracts, Shuchman, P. (1961). Temp. L. Rev., 35, 125. This paper how the freedom of contract is venerable but also dangerous and elusive. It follows the laissez-faire economic doctrine and shows how the desire to separate freedom and legal situation exists.
- Arbitration clauses in consumer contracts of adhesion: Fair play or trap for the weak and unwary, Brafford, A. (1995). J. Corp. L., 21, 331. This study shows how arbitration contracts can be a trap for consumers since they cannot negotiate the clauses that affect them.
- The unification or harmonisation of law by means of standard contracts and general conditions, Schmitthoff, C. M. (1968). International & Comparative Law Quarterly, 17(3), 551-57. This paper investigates the contributions that the standard contract forms in association with general conditions of business towards the unification of international trade law.
- Contract law and distributive justice, Kronman, A. T. (1979). Contract law and distributive justice. Yale Lj, 89, 472. This study examines the freedom that the legal system leaves individuals when it comes to disposing of their property. This freedom includes the power of making contracts that allow for the exchange of properties on the terms agreed to by the parties.
- Finding the Contract in Contracts for law, Forum and Arbitration, Woodward Jr, W. J. (2006). Hastings Bus. LJ, 2, 1. This paper examines how in most law articles, a fair amount of attention is given to choice-of-law and choice-of-forum clauses present in business dealings.
- It Is Time the Law Begins to Protect Consumers from Significantly One-Sided Arbitration Clauses Within Contracts of Adhesion, Raymond, A. H. (2012). Neb. L. Rev., 91, 666. This article argues that something should be done to make sure that those consumers who face arbitration clauses that are mandatory in contracts of adhesion receive protection from firms that intend on using arbitration as a means of settling disputes.
- Types of Contracts, Interventions of Law, Rubin, E. L. (1999). Wayne L. Rev., 45, 1903. This paper explains two distinctions existing in contract law. The first distinguishes contracts made between merchants from those made between merchants and consumers. The second recognizes the contracts which are negotiated and those which consist of standardized terms.
- Reforming the Law of Adhesion Contracts: A Judicial Response to the Subprime Mortgage Crisis, Smith, S. (2010). Lewis & Clark L. Rev., 14, 1035. This article investigates the role that contracts of adhesion played in imposing future financial commitments on consumers thereby leading to the subprime mortgage crisis and together with the great depression.
- Freedom of Contract and Adhesion Contracts, Wilson, N. S. (1965). International & Comparative Law Quarterly, 14(1), 172-193. This paper examines how the term freedom of contract has changed over time. The phrase is now commonly used in denying one party what the contract claims to achieve for him.
- Efficient Consumer Form Contract: Law and Economics Meet the Real World, Meyerson, M. I. (1989). Ga. L. Rev., 24, 583. This article attempts to reconcile the different views that supporters of law and economics and the critics of the same have.