Adhesion Contract (Contract of Adhesion)

Overview

An adhesion contract (also called a "standard form contract" or a "boilerplate contract")  is a contract drafted by one party (usually a business with stronger bargaining power) and signed by another party (usually one with weaker bargaining power, usually a consumer in need of goods or services). The second party typically 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.

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 agreement, 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.

Proponents of the standard contract, however, argue that it promotes efficiency in contract law, which saves time and negotiation costs.

 

Adhesion Contracts in the 21st Century

Adhesion contracts have grown in relevance during the 21st century, largely due to the rise of digitally signed contracts and "click through" contracts. Courts have held that in order for an electronic contract ot be valid, it should appear as identical to a paper contract as possible. Buried clauses, or inconspicuous clauses, will likely not be enforced. In Fairfield Leasing Corporation v. Techni-Graphics, Inc., the Superior Court of New Jersey invalidated an adhesion contract because its waiver clause was single-spaced and had a small typefont; as such, the court deemed the clause to be too inconspicuous.

 

Solutions to Problems Caused by 21st Century Adhesion Contracts 

Some courts have used a more energized unconscionability doctrine, finding more clauses to be unconscionable. However, doing so too often may encompass too many contract issues and may infringe on the freedom of contract. Other courts have required parties to select the important terms, of the contract, and the courts have required those parties to put those issues in a large box on the first page of the contract. Some, have pointed out issues with this method by questioning how large the box can grow, and by questioning what should go in the box. 

Adhesion Contracts in the 21st Century

 
Keywords: