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
Life insurance on the life of a child. ...
Endorsement to the personal automobile policy (pap) that insures other motorized vehicles such as golf carts and motorcycles owned by a policyholder. ...
Policy covering an insured's property at several different locations. This coverage is used by business firms that have several locations and may move property from location to location. ...
In group insurance, adjustment of premiums, because of reduced expenses due to economy of scale. Group Me premiums are subject to negotiation and modification because of administrative ...
Federal social insurance program that provides monthly benefits to qualified retirees, their dependents, their survivors, and, in some cases, disabled workers. OASDHI was created by the ...
Retirement vehicle permitted under section 403 (b) plan of the U.S. Internal Revenue Code for employees of a public school system or a qualified charitable organization. Under such an ...
Adaptation of a standard insurance contract for special needs. Standard forms do not cover all needs but they can be adapted by an underwriter, broker, or an insurance company at the ...
Taking over of an insurance company's assets by the State Insurance Commissioner when examination of the annual report reveals that the company is in substantial financial difficulty. The ...
Trade association of property and casualty insurance companies that do not have membership in a rating bureau. These companies do not follow standard rates and forms authored by a rating ...
Have a question or comment?
We're here to help.