Adhesion Contract

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Adhesion Contract

A type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage.

An example of an adhesion contract is a standardized contract form that offers goods or services to consumers on essentially a "take it or leave it" basis without giving consumers realistic opportunities to negotiate terms that would benefit their interests. When this occurs, the consumer cannot obtain the desired product or service unless he or she acquiesces to the form contract.

There is nothing unenforceable or even wrong about adhesion contracts. In fact, most businesses would never conclude their volume of transactions if it were necessary to negotiate all the terms of every Consumer Credit contract. Insurance contracts and residential leases are other kinds of adhesion contracts. This does not mean, however, that all adhesion contracts are valid. Many adhesion contracts are Unconscionable; they are so unfair to the weaker party that a court will refuse to enforce them. An example would be severe penalty provisions for failure to pay loan installments promptly that are physically hidden by small print located in the middle of an obscure paragraph of a lengthy loan agreement. In such a case a court can find that there is no meeting of the minds of the parties to the contract and that the weaker party has not accepted the terms of the contract.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

adhesion contract (contract of adhesion)

n. a contract (often a signed form) so imbalanced in favor of one party over the other that there is a strong implication it was not freely bargained. Example: a rich landlord dealing with a poor tenant who has no choice and must accept all terms of a lease, no matter how restrictive or burdensome, since the tenant cannot afford to move. An adhesion contract can give the little guy the opportunity to claim in court that the contract with the big shot is invalid. This doctrine should be used and applied more often, but the same big guy-little guy inequity may apply in the ability to afford a trial or find and pay a resourceful lawyer. (See: contract)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
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The History of the Adhesion Contract: Unconscionable Agreements
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Finally, because the determination of whether a contract is an adhesion contract often depends oil the specific facts surrounding entry into the agreement, new employees should be given an opportunity to review the provisions of the dispute resolution policy carefully and make an informed decision as to whether they wish to accept employment with the employer.
Instead of analyzing the reasonableness of the forum-selection clause based strictly on factors the Court reviewed in The Bremen, the Court "refine[d] the analysis of The Bremen to account for the realities of form passage contracts." (92) The Court proceeded to explain that a reasonable forum-selection clause in an adhesion contract like a cruise passage ticket could be permissible, since cruise lines regularly carry passengers to and from many different places.
The most widely recognized example of an adhesion contract is an insurance policy.
(140) Adhesion contracts and arbitration clauses are the alfalfa of contract law; they may be useful to the modern economy in limited amounts but are dangerous to the purposes of contract law when made a steady diet.