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.

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 ?
consumers in adhesion contracts, than a further stricture on
FAA, makes this concern over adhesion contracts clear:
Some jurisdictions employ a two-prong analysis for unconscionability that involves adhesion contracts.
Some jurisdictions employ a "reasonable expectations" approach to adhesion contracts.
central objectives of adhesion contracts has been to remove the class
Adhesion contracts also create risks that threaten private ADR
However, this assertion itself is questionable, for the enforcement of adhesion contracts does promote stability in the market, or at least that view is generally accepted.
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.
Circuit and the Ninth Circuit found a similar presumption applicable to COL clauses in maritime adhesion contracts, but only under circumstances where the courts were ultimately protecting the non-drafting party to an adhesion contract.
Some courts and scholars have acknowledged that insurance policies are often adhesion contracts rather than freely negotiated contracts between parties with equal bargaining power.