Adhesion Contract

MoneyBestPal Team
A type of contract that is drafted by one party usually a business or an organization, and presented to another party, usually a consumer or a client.

An adhesion contract is a particular kind of contract that is created by one party, typically a company or organization, and provided on a "take it or leave it" basis to another party, typically a customer or client.

The drafting party, who has greater negotiating power and knowledge than the other party, is given preference in the contract's terms and conditions, which are non-negotiable. Boilerplate contracts, standard forms, and leonine contracts are other names for adhesion contracts.

Examples of Adhesion Contracts

Adhesion contracts are frequently used in daily life, particularly when there is a high volume of transactions and a requirement for efficiency and consistency. Some examples of adhesion contracts are:
  • Insurance policies
  • Credit card agreements
  • Mortgage contracts
  • Leases
  • Car rental agreements
  • Online terms of service
  • Software licenses

Advantages and Disadvantages of Adhesion Contracts

Adhesion contracts have some advantages and disadvantages for both the drafting party and the accepting party. Some of them are:

  • They improve economic efficiency by lessening the need for individually tailored contracts for each transaction.
  • By giving all the necessary information in a manner that is both legal and clear, they lower transaction costs.
  • They streamline the purchasing process by providing a standard contract that the customer can quickly accept or reject.

  • They put the accepting party at an undue risk, who might be forced to sign the contract if they require the commodity or service being given.
  • The drafting party may take use of their position to insert clauses that are irrational or unconscionable because they create unequal power relations and unfair terms that favor them.
  • In the event of a dispute, they restrict the receiving party's ability to bargain for better terms or pursue legal action.

Legal Issues and Enforcement of Adhesion Contracts

Adhesion contracts are legal and enforceable in most countries, but they are often subject to scrutiny and interpretation by courts before they are upheld. Courts may look at factors such as:
  • The clarity and readability of the contract
  • The availability and accessibility of alternative options
  • The importance and necessity of the good or service being offered
  • The presence and disclosure of any hidden or unfair clauses
  • The consent and understanding of the accepting party

If a court decides that an adhesion contract is unfair or oppressive enough to shock the conscience of a reasonable person, it may be declared void or modified. The doctrine of contra proferentem, which states that any confusing or unclear provisions in the contract shall be read against the drafting party, may also be used by courts.