adhesion contract (contract of adhesion)

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An adhesion contract exists if the parties are of such disproportionate bargaining power that the party of weaker bargaining strength could not have negotiated for variations in the terms of the adhesion contract. Adhesion contracts are generally in the form of a standardized contract form that is entirely prepared and offered by the party of superior bargaining strength to consumers of goods and services. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit.

Because adhesion contracts do not afford consumers a realistic opportunity to bargain, the consumers are often faced with adhesion contracts on a take-it-or-leave-it basis. Under such conditions, the consumer has little to no ability to negotiate more favorable terms. Instead, consumers cannot obtain the desired product or service except by acquiescing in the form contract. 

Courts may look at the doctrine of reasonable expectations to determine whether to strike down an adhesion contract. The doctrine of reasonable expectations 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 he had known that the agreement contained the particular term. In other words, people are bound by terms a reasonable person would expect to be in the contract. 

Courts may also look at whether the provisions are written in clear, unambiguous terms when determining whether to strike down an adhesion contract. This is based on the doctrine of unconscionability

Procedural unconscionability deals with the contract formation process and whether the bargaining process was deficient. Some factors of procedural unconscionability include duress, fraud, undue influence, and fine print. Substantive unconscionability deals with the content of the contract and whether the nature of the contract terms is oppressive. Some factors of substantive unconscionability include inflated price, unfair disclaimers, immoral clauses, and contracts that contravene public policy.

Electronic Adhesion Contracts

There are three types of electronic adhesion contracts: browse-wrap, click-wrap, and sign-in-wrap.

Browse-wrap contracts may require consumers to click through multiple hyperlinks to read and agree to the terms and conditions. Therefore, courts usually do not enforce browse-wrap contracts because of the procedural unconscionability of buried terms. See Jerez v. JD Closeouts, LLC, 36 Misc. 3d 161.

On the other hand, courts do generally enforce click-wrap and sign-in-wrap contracts. Click-wrap contracts require that consumers click “I agree” by means of an immediately available pop-up box. See Caspi v. Microsoft Network, 323 N.J. Super. 118. Sign-in-wrap contracts include a hyperlink, often labeled as “Terms of Service” or “Terms and Conditions,” that is located by a sign-up button. Sign-in-wrap contracts require that users 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.

[Last updated in December of 2021 by the Wex Definitions Team]