Define: Adhesion Contract

A type of contract is a legally binding agreement between two parties to do a certain thing in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage. An example of an adhesion contract is a standardised contract form that offers goods or services to consumers on essentially a “take it or leave it” basis without giving consumers realistic opportunities to negotiate terms that would benefit their interests. When this occurs, the consumer cannot obtain the desired product or service unless he or she acquiesces to the form contract. There is nothing unenforceable or even wrong about adhesion contracts. In fact, most businesses would never conclude their volume of transactions if it were necessary to negotiate all the terms of every consumer credit contract. Insurance contracts and residential leases are other kinds of adhesion contracts. This does not mean, however, that all adhesion contracts are valid. Many adhesion contracts are unconscionable; they are so unfair to the weaker party that a court will refuse to enforce them. An example would be severe penalty provisions for failure to pay loan instalments promptly that are physically hidden by small print located in the middle of an obscure paragraph of a lengthy loan agreement. In such a case, a court can find that there is no meeting of the minds of the parties to the contract and that the weaker party has not accepted the terms of the contract.

Adhesion contracts are agreements where one party holds a significant amount of bargaining power over the other party, leaving the weaker party unable to negotiate the terms of the contract. These contracts are typically presented in a standardised form by the stronger party, and are commonly used in transactions involving insurance policies, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit. Consumers are often left with no choice but to accept the terms of an adhesion contract, as they cannot obtain the desired product or service without agreeing to the contract. Courts may use the doctrine of reasonable expectations to determine whether to strike down an adhesion contract, which states that a party who adheres to the other party’s standard terms does not assent to the terms if the other party has reason to believe that the adhering party would not have accepted the agreement if they had known that the agreement contained the particular term. Electronic adhesion contracts come in three forms: browse-wrap, click-wrap, and sign-in-wrap. Browse-wrap contracts are usually not enforced by courts due to the procedural unconscionability of buried terms. Click-wrap contracts require consumers to click “I agree” by means of an immediately available pop-up box. Sign-in-wrap contracts require users to electronically accept the terms by clicking “I accept” or “I agree” as the last step of the sign-up process before allowing consumers to use their products or services. These contracts are adhesion contracts because the person cannot negotiate the terms of the contract and must accept the terms as presented. For example, if a person wants to use a social media platform, they may be required to accept the terms and conditions of the platform through a sign-in-wrap contract. The person must click “I accept” before they can use the platform.