In Fairfield Leasing Corporation v. Techni-Graphics, Inc. (256 N.J.Super. 538 (1992)), Superior Court of New Jersey invalidated an adhesion contract because its waiver clause was inconspicuous. The case involved a standardized form contract with contained a waiver of trial by jury, which is a constitutional right. The waiver provision also contained a merger clause and a no-modification clause and was printed in tiny letters: “a classic example of a document which has been prepared with the intent that it neither be negotiated nor read.” The Court held that where a non-negotiated jury waiver clause appears inconspicuously in an adhesion contract, which was entered into by a weaker party who did not have assistance of counsel, the waiver provision was unenforceable and therefore void. The Court emphasized the unequal bargaining power of the parties and the lack of mutual assent that are common in contracts of adhesion: “Such standardized contracts have been described as those in which one predominant party will dictate its law to an undetermined multiple rather than the individual. They are said to resemble a law rather than a meeting of the minds.”
adhesion contract (contract of adhesion)
Definition
A standard form contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit. Also known as adhesive contract; adhesory contract; adhesionary contract; take-it-or-leave-it contract; leonine contract.
Courts carefully scrutinize adhesion contracts and sometimes void certain provisions because of the possibility of unequal bargaining power, unfairness, and unconscionability. Factoring into such decisions include the nature of the assent, the possibility of unfair surprise, lack of notice, unequal bargaining power, and substantive unfairness. Courts often use the “doctrine of reasonable expectations” as a justification for invalidating parts or all of an adhesion contract: the weaker party will not be held to adhere to contract terms that are beyond what the weaker party would have reasonably expected from the contract, even if what he or she reasonably expected was outside the strict letter of agreement.
Definition from Nolo’s Plain-English Law Dictionary
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:10 pm
“In the 19th century it was common practice for shipowners to issue bills of lading that included stipulations exempting themselves from liability for losses occasioned by the negligence of their employees. Because a bill of lading was (and is) a contract of adhesion, which a shipper must accept or else find another means to transport his goods, shippers were in no position to bargain around these no-liability clauses. Although the English courts enforced the stipulations, see Compania de Navigacion la Flecha v. Brauer, 168 U.S. 104, 117-118, 18 S.Ct. 12, 15, 42 L.Ed. 398 (1897), citing Peck v. North Staffordshire Railway, 10 H.L. Cas. 473, 493. 494 (1863), this Court concluded, even prior to the 1893 enactment of the Harter Act, that they were ‘contrary to public policy, and consequently void,’ Liverpool & Great Western Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 442, 9 S.Ct. 469, 472, 32 L.Ed. 788 (1889).” J. Stevens (dissenting), Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 543-544 (1995).
