What is Adhesion Contract?

664 reads · Last updated: December 5, 2024

An adhesion contract is an agreement that usually has non-negotiable terms and conditions. Generally, it's prepared by a party to a potential transaction that has the product or service sought by another party, the consumer. The former has the stronger bargaining position. The latter must accept the adhesion contract to obtain the product or service.Adhesion contracts are also known as standard, standardized, or boilerplate contracts.

Definition

An adhesion contract is an agreement that typically contains non-negotiable terms and conditions. It is usually prepared by one party who has the product or service needed by the other party, the consumer. The former has a stronger bargaining position, and the latter must accept the adhesion contract to obtain the product or service. Adhesion contracts are also known as standard contracts, uniform contracts, or boilerplate contracts.

Origin

The concept of adhesion contracts originated in the early 20th century with the rise of mass production and service industries. Companies began using standardized contracts to simplify the transaction process. This form of contract became more prevalent in the mid-20th century, especially in industries like insurance, banking, and telecommunications.

Categories and Features

Adhesion contracts are typically divided into two categories: consumer contracts and commercial contracts. Consumer contracts are used for purchasing goods or services, such as mobile service agreements or insurance policies. Commercial contracts are used in transactions between businesses. Their main features include non-negotiable terms and contract uniformity, which make the transaction process more efficient but may also lead to consumer rights being compromised.

Case Studies

A typical example is the user agreement from mobile service providers, which are often adhesion contracts that users must accept to use the service. Another example is insurance contracts, where the standardized terms provided by insurance companies usually do not allow for consumer modifications.

Common Issues

Common issues investors face with adhesion contracts include misunderstanding the terms and lack of negotiation space. A common misconception is that all terms are immutable, whereas consumers can seek modifications through complaints or legal avenues.

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