Key Takeaways:

  • A contract of adhesion is a standardized agreement drafted by one party with greater bargaining power, often leaving the other party little to no ability to negotiate terms.
  • These contracts are widely used in industries like insurance, telecommunications, real estate, healthcare, and online services for efficiency and cost savings.
  • While legal, courts carefully review adhesion contracts for fairness, especially regarding ambiguity, unconscionability, and a party’s reasonable expectations.
  • Common controversial clauses include mandatory arbitration, forum selection, and liquidated damages.
  • In the digital era, click-through and online contracts of adhesion are increasingly prevalent, but hidden or overly complex clauses may be deemed unenforceable.
  • Consumers should read adhesion contracts carefully and seek legal guidance if terms seem unclear or overly one-sided.

Contracts of adhesion — also known as boilerplate contracts, standard form contracts, take-it-or-leave-it contracts, or adhesionary contracts — are contracts between two parties where the drafting party usually has stronger bargaining power than the other.

Contract of Adhesion Meaning

Contract of adhesion is a contract that is generally drafted by one party who has greater bargaining power and signed by another party who has lesser bargaining power. The party with the stronger bargaining power is usually a business that draws up the agreement, and the party with the weaker bargaining power is often a consumer who needs specific goods or services. Since there is such disparity between the parties, the weaker party usually adheres to the initial contract since it is unable to negotiate the original terms of the deal. This is also sometimes referred to as a “take it or leave it” situation. Most of the contracts that consumers sign are adhesion contracts.While this type of contract would seem unfair or even unenforceable, there is nothing wrong with entering into such an agreement. In fact, this type of contract is more common than one would think. If businesses spent time negotiating every single deal, they wouldn’t get any work done.

Key Features of a Contract of Adhesion

A contract of adhesion typically has several defining characteristics:

  • Standardized terms: The language is pre-drafted and uniform for all signers, with minimal opportunity for individual negotiation.
  • Imbalance in bargaining power: The drafting party, usually a business, holds most of the decision-making authority over contract content.
  • Non-negotiability: The non-drafting party generally must accept the terms “as-is” or walk away from the deal entirely.
  • Mass application: Such contracts are designed for efficiency, allowing businesses to quickly enter agreements with large numbers of customers.

These features can make contracts of adhesion efficient but also raise questions about fairness, especially when terms are hidden in fine print or use complex legal jargon.

Where Are Adhesion Contracts Used?

Consider an insurance contract as an example of an adhesion contract. The insurance company and its agent draw up the agreement, and the potential policyholder can only refuse to sign. Consumers cannot draw up a new agreement or counter the offer. Insurance companies, like most other business, are for-profit, and these contracts are especially common in the insurance field. There are few insurance companies that allow consumers to change contract terms or negotiate. Basically, consumers can take it or leave it. These are standard contracts in a number of transactions, such as the following:

  • House leases
  • Car buying
  • Insurance coverage
  • Mortgages
  • Home contractor services
  • Auto repair services
  • Medical services
  • Veterinary care
  • Dental services

Other businesses that commonly use adhesion contracts are cable companies, cell phone providers, airlines, online vendors, and hotels. For instance, when you purchase an airplane ticket, you do not sit down with an airline representative to negotiate terms in the contract, such as the departure time, ticket price, and cabin temperature.

Companies of all sizes would not be able to operate efficiently if the only way they could enforce contracts was negotiating each agreement separately. Instead, most businesses prepare standard contracts for their potential clients to sign. If consumers are not happy with the agreement as-is, they are free to take their business elsewhere. In general, contracts are not unenforceable just because they are adhesion contracts.

Real-World Examples of Adhesion Contracts

Beyond the industries already mentioned, adhesion contracts also appear in:

  • Online platforms: Social media sites, streaming services, and e-commerce platforms often use clickwrap or browsewrap agreements to set terms of use.
  • Transportation services: Rideshare companies and public transit systems frequently require acceptance of standard terms before use.
  • Software licensing: End User License Agreements (EULAs) for apps and computer programs are a common example.

For example, signing up for a new social media account generally requires agreeing to lengthy terms of service that cannot be altered. Even if a user disagrees with a clause, they must either accept the entire agreement or forego access to the platform.

Are Adhesion Contracts Legal and Fair? 

Contracts of adhesion are legal and important in the business world. However, there is lots of disagreement about how fair they are. Courts scrutinize contracts of adhesion carefully. Sometimes, they void specific provisions on the basis of potential inequality in bargaining power, overall unfairness, and unconscionability.

Courts use the following factors when determining the fairness or lack thereof in a contract of adhesion:

  • The potential of unfair surprise
  • The nature of the contract
  • Lack of notice
  • Unequal bargaining power
  • Substantive unfairness

For example, in Texas, insurance companies cannot use complex or ambiguous language. If this occurs, the insurance holder can bring a legal action against the insurance company indicating that he or she didn’t understand the terms of the insurance contract. The court will require the insurance company to write its contracts in the way that a person of average intelligence can understand. Therefore, any ambiguity in the contract will be interpreted in favor of the insurance holder.

Similarly, for any parties that are involved in a legal dispute regarding an adhesion contract, the court will look at the doctrine of reasonable expectations to determine if there is any justification for enforcing the terms of the contract. This is done by looking at the contract terms and attempting to identify what the weaker party would have reasonably expected from the contract.

How Courts Assess Adhesion Contracts

Courts do not automatically invalidate contracts of adhesion but will closely evaluate them under doctrines like:

  • Unconscionability: Whether the terms are so one-sided they shock the conscience.
  • Reasonable expectations: Whether the non-drafting party could have reasonably expected the contested terms.
  • Interpretation against the drafter: Ambiguities are often resolved in favor of the non-drafting party.

Additionally, some jurisdictions require that especially burdensome terms (such as waivers of legal rights) be clearly highlighted or separately acknowledged to be enforceable. If terms are buried in dense text or written in overly complex language, courts may find them invalid.

Supporters and Detractors of Adhesion Contracts

Supporters of standard contracts argue that these agreements promote efficiency, which saves parties time and negotiation costs. If businesses did not have form contracts, proponents argue, the time involved in negotiating and preparing a single contract for every transaction would increase substantially. As a result, prices would increase, perhaps outrageously. Another downside to that is that the consumer could put in unfair terms.

There is also the question of whether the drafters of adhesion contracts — which they enter into freely, without any coercion on the part of the client or consumer — should evade liability for unfair agreements.

The clauses that cause the most concern regarding fairness in an adhesion contract include the following:

  • Specific forum selection: The contract maker has the power to choose the forum, locking the signor out of the selection process.
  • Mandatory arbitration: If a signor wishes to contest the contract, limits are placed on the signor's access to the court system.
  • Liquidated damages: This limits how much the signor may recover or specifies how much the signor may have to pay in case of a dispute.

The most important thing you can do before signing an adhesion contract is to read it over carefully. Remember — the other party wrote it to be in its favor, not yours. If you have questions or concerns, you may want to consult with an expert who's skilled in contract law. That way, you will better understand all of the legalese, terms, and conditions before you sign.

Potential Risks for Consumers

While adhesion contracts streamline transactions, they can pose risks, including:

  • Hidden obligations: Terms buried in fine print that impose unexpected duties or costs.
  • Limited legal remedies: Clauses restricting the right to sue or capping damages.
  • Unilateral changes: Provisions allowing the drafting party to change terms without notice.

Consumers should always:

  1. Read the entire agreement before signing.
  2. Look for terms limiting dispute resolution options or imposing unusual fees.
  3. Seek legal advice when in doubt, especially for high-value transactions.

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.

Digital Adhesion Contracts and Enforceability

The rise of e-commerce and mobile applications has led to new forms of adhesion contracts, such as:

  • Clickwrap agreements: Users actively click “I agree” to terms before proceeding.
  • Browsewrap agreements: Terms are posted on a website and deemed accepted through use, even without explicit consent.

Courts are more likely to enforce clickwrap agreements when:

  • The terms are conspicuously presented.
  • Users are required to take affirmative action to accept them.

Browsewrap agreements are more vulnerable to challenge because users may not have actual notice of the terms. For enforceability, online adhesion contracts should ensure that important clauses are clear, visible, and understandable to an average user.

Frequently Asked Questions

1. What makes a contract of adhesion different from a negotiated contract? An adhesion contract is pre-drafted by one party and offered on a “take-it-or-leave-it” basis, while a negotiated contract involves back-and-forth discussions and mutual modifications.

2. Are contracts of adhesion always enforceable? Not necessarily. Courts may strike down or modify terms that are unconscionable, misleading, or inconsistent with reasonable expectations.

3. How can I protect myself before signing an adhesion contract? Read all terms carefully, ask for clarification, and consider legal advice—especially if the contract involves significant obligations or restrictions.

4. Can online terms of service be considered contracts of adhesion? Yes. Most online clickwrap or browsewrap agreements function as adhesion contracts because the user cannot negotiate individual terms.

5. What happens if an adhesion contract has ambiguous terms? Ambiguous terms are typically interpreted against the party that drafted the agreement, favoring the non-drafting party.

How UpCounsel can help you

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