Contract of Adhesion Definition: Everything You Need to Know
A contract of adhesion definition is an agreement drafted by one involved party and signed by the other.3 min read
2. History of Adhesion Contracts
3. Adhesion Contracts in the 21st Century
A contract of adhesion definition is an agreement drafted by one involved party and signed by the other.
An adhesion contract is also referred to as a boilerplate or standard form contract. The party that drafts the contract is usually the stronger of the two and has more bargaining power, while the other party is often a consumer who needs services or goods. In most cases, the signing party doesn't have negotiating power or the option to modify the contract terms.
The most common uses for adhesion contracts include matters involving:
- Vehicle purchases
- Other consumer credit forms
When a court looks at an adhesion contract, it could void specific provisions of the agreement due to factors like unconscionability, unfairness, or unequal power for bargaining.
Other potential factors include:
- Substantive unfairness
- The nature of the agreement
- Lack of notice
- The potential for an unfair surprise
The idea of reasonable expectations is commonly used by the courts as a reason to invalidate all or part of a contract of adhesion. This doctrine ensures that the signing party won't be held to contract terms that are beyond reasonable expectation, even if what was expected wasn't clearly outlined in the contract. Standard contract proponents may argue that this agreement provides more efficiency in the laws around contracts, helping to reduce negotiation costs and save time.
Before an adhesion contract can exist, the party making the offer must provide the signing party with standard conditions and terms that are the same as what they offer to other clients and customers. These conditions and terms cannot be negotiated. One example of this type of contract is an agreement for insurance. In an insurance agreement, the agent and the insurance company hold the power to write the contract. The person seeking to obtain an insurance policy can only use their right of refusal. An insurance company will not accept any type of counteroffer or new contract.
Before you sign an adhesion contract, make sure to read every line carefully since the rules and terms are all coming from another party. The Uniform Commercial Code is standard across most states in the United States, which includes provisions around adhesion contracts for the lease or sale of goods. Therefore, an adhesion contract can typically be enforced within the U.S. However, a contract of adhesion is subject to more stringent scrutiny.
The standard form agreements used for leasing a home, obtaining insurance coverage, taking out a mortgage loan, and buying a car are adhesion contracts.
You might also use an adhesion contract for:
- Auto repair services
- Veterinary care
- Home repair or contractor services
- Medical or dental care
History of Adhesion Contracts
The idea of an adhesion contract first appeared in civil law in France. However, it didn't appear on the American legal scene until Edwin W. Patterson published an article in the Harvard Law Review in 1919. Following that article, many courts in the U.S. adopted the idea of adhesion contracts. This adoption was expedited by an adhesion analysis that was endorsed by the California Supreme Court in 1962. Additional information about the first adhesion contracts in the U.S. is found in Steven v. Fidelity & Casualty Co., 58 Cal. 2d 862, 882 n.10 (1962).
Adhesion Contracts in the 21st Century
In the 21st century, adhesion contracts have continued to become more important and relevant. Their growth is due in part to the increase in the use of click-through contracts and contracts signed digitally. In order to legally enforce a contract provided electronically, the agreement must look identical to a contract on paper. Inconspicuous or buried clauses typically can't be enforced.
In a court case titled Fairfield Leasing Corporation v. Techni-Graphics, Inc., the New Jersey Superior Court ruled that an adhesion contract was invalid because the waiver clause had a minimal typeface and single spacing, thus causing it to be ruled as too inconspicuous. Other courts use the unconscionability doctrine, ruling that certain clauses in adhesion contracts are not reasonable or ethical. However, since this ruling can infringe on the option to use contracts or bring up too many issues, the unconscionability doctrine can be more challenging to use.
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