Definition of "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.

  1. 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.

  1. 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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Contractor who represents different insurance companies and who searches the market for the best place for a client's business. The independent agent, who owns the records of policies sold, ...

Representative of an insurance company who sells ordinary and industrial life insurance policies. In an effort to move their field forces into the ordinary life business, many industrial ...

Coverage for small groups that cannot meet the underwriting standards of true group insurance. Even though the franchise insurance covers an entire group, individual policies are written on ...

Annual report to policyholders of certain cash value life insurance products and annuities to inform them of the value of the investment portion of their contracts. Buyers of whole life ...

Cost of an annuity. Annuities are often paid for in a lump sum rather than annual or other periodic payments. This sum, which guarantees an income, usually for life, is called the purchase ...

Total of interest, dividends, and other earnings derived from the insurance company's invested assets minus the expenses associated with these investments. Excluded from this income are ...

Yearly renewable term (YRT) life insurance under which an insured can usually re-apply for term insurance every fifth year at a lower premium than the guaranteed renewal rate. If the ...

Fidelity bond under which an insured employer is reimbursed for loss caused by the dishonest act of two or more employees named or listed in a schedule attached to the bond. The specific ...

Coverage for an employer in the event of dishonesty of any employee. ...

Popular Insurance Questions