What is an Adhesion Contract?

An adhesion contract is also referred to as a contract of adhesion or a standard form contract.  Often times this type of contractual agreement is drafted by one party, and usually looks like a template contract used in all agreements with that party. Adhesion contracts are commonly used for car purchases, cell phone and cable contracts, insurance matters, rental agreements, mortgages, and deeds.

In an adhesion contract, the drafting party is usually a business (typically a large business) with a much stronger bargaining position. The other party, usually the purchaser or consumer, does not have a role in drafting the contract and is simply presented with a “take-it-or-leave-it” offer without the ability to negotiate or modify the contract terms.

Because of the mismatched drafting power that is a part of an adhesion contract, courts will carefully scrutinize the terms of challenged adhesion contracts. A court can invalidate provisions in an adhesion contract if it finds evidence of unequal bargaining power, unfairness, and unconscionability, all to the detriment of the challenging party.

In determining whether there was unequal bargaining power, unfairness, and unconscionability, a court will examine the nature of what the signing party was agreeing to, the possibility of unfair surprise, and whether there was a lack of notice. The “doctrine of reasonable expectations” is one way for an adhesion contract challenger to justify invalidating an entire adhesion contract, or certain terms thereon. Under this doctrine, the weaker party will not be held to contract terms that are beyond what the party would have “reasonably expected” from the contract.

For example, a cell phone company forcing all customers who use its services to attend arbitration sessions in Detroit would likely not be “reasonably expected” by consumers in Southern California.  A court will not, however, free a party from an obligation to perform contract terms just because they did not read or understand a contract.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.