Adhesion Contract

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Related to Adhesion Contract: unilateral contract, exculpatory clause, personal contract, Unconscionable contract

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.

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)

References in periodicals archive ?
129) It thereby allowed adhesion contract drafters to continue
141) and in the adhesion contract context because of an insistence on
While Hooters is an extreme case, many adhesion contract drafters
As mentioned earlier, injecting a section 301 preemption analysis at this point only obfuscates the issue of enforceability under contract law and ignores the necessary efficiency of adhesion contracts.
60) Clearly, however, it would not be proper to use such an example to support the proposition that agreements, otherwise enforceable as adhesion contracts under state law, sometimes may be preempted by section 301.
Under general Supremacy Clause analysis, not under section 301, the distinction between two-party, bargained agreements and mass-market adhesion contracts becomes significant.