Contract Of Adhesion
The definition of contract of adhesion or, as it is also known, an adhesion contract is explained as an agreement between two parties where one party has more power than the other when the terms of the contract are set. These kinds of contracts of adhesion are used when the party with more power gives its customers the same standard contract. The customer can not alter these contacts, the customer can not make amendments or addendums to the contract, they can either sign it or not. The terms and conditions specified in a contract of adhesion are not open for negotiation, and they are also known as standard contracts or boilerplate contracts.
What is a Contract of Adhesion, and Who uses it?
The term may seem intriguing, but the contract of adhesion is the most common type of contract that any individual may come across in their daily lives. They are used in insurance, vehicle purchases, leases, mortgages, telecommunication subscriptions, and other types of transactions where a company deals with large numbers of customers. Adhesion contracts are enforced in the US through the Uniform Commercial Code (UCC), and most states, with the exception of Louisiana, adhere to the set of rules and regulations.
When dealing with a mortgage, the customer must accept all the terms and conditions specified within the agreement signed. The customer can not write their own contract or come with a counteroffer that the financial institution could agree to. These adhesion contracts should demand the full attention of the customers as the terms and conditions are all written down by the other party.
How are Adhesion Contracts Enforced?
Contracts that are considered adhesion contracts have to be seen as a “take it or leave it” option for customers. Two forms of scrutiny are applied in court to verify if an adhesion contract is enforceable or considered null and void.
- Reasonable expectation
The terms and conditions specified in a contract of adhesion are expected to be within reason. If these terms and conditions go beyond what the customer reasonably expects from the contract, the contract is deemed unenforceable. The purpose of the terms, the prominence of the terms, and the way in which the contract was accepted are all taken into account to determine whether the contract is enforceable.
- Unconscionability
If the terms and conditions of a contract of adhesion include oppressive terms that, as the one-sided contract provisions block them, leave the customer unable to fight back, the contract is considered unenforceable. Simply put, if the contract had exceptionally unfair terms imposed on the customer and the customer can’t change or influence them due to the way the contract is written (by one party), the contract can be considered unenforceable.
Popular Insurance Terms
Procedure in which a home office interviewer (who may or may not have underwriting experience) interviews applicants on the telephone. The questions asked the applicant are automated and ...
Type of charitable remainder trust (CRT) that pays interest income for life or for a specified term to a non charitable beneficiary. The remainder of the interest is received by a charity. ...
Bodily injury liability and property damage liability expressed as a single sum of coverage. ...
Right of a policyholder, in life insurance with cash values, to continue full coverage for a limited period, as shown in a table in the policy, with no further premiums payable. ...
Individual who works in the home office of an insurance company and performs the function of underwriting to determine if an applicant is insurable at standard rates, substandard rates, ...
Premium required by an insurance company for plans subject to premium adjustment. The initial provisional premium is paid to put a commercial property or liability insurance policy into ...
Coverage that is renewable at the option of the insured, who is not required to take a medical examination. Regardless of physical condition, the insured must be allowed to renew the policy ...
Probability of one's living to a specific age according to a particular mortality table. Life expectancy is the beginning point in calculating the pure cost of life insurance and annuities ...
Annuity contract. If the annuitant dies before receiving income at least equal to the premiums paid, a beneficiary receives the difference in installments. If the annuitant lives after the ...
Have a question or comment?
We're here to help.