Adhesion contracts are boilerplate agreements that have become integral to our daily lives. You can’t change the clauses on a contract of adhesion since they’re non-negotiable. The supplier draws up the agreement, and you only have to take it or walk away. 

Notwithstanding, you need to know what you’re getting into whenever you sign one of these agreements. 

In this article, we’ve provided insights into adhesion contracts, their benefits, and the limits of enforceability.

Adhesion contract definition and history

A contract of adhesion is a legal agreement in which one party states the terms of engagement for the other party. The business that drafts the contract has all the bargaining power, leaving the other just to sign.

An adhesion contract is another term for:

1. Boilerplate agreements 
2. Standard form contracts
3. Non-negotiable agreements 

Originally invented in France, these agreements became popular in the United States circa 1962. Currently, these boilerplate contracts are used for recurring business needs.

Companies use adhesion contracts when dealing with high-volume clients for similar, standardized services. The signer doesn’t get to select what terms they’re satisfied with or customize terms according to any specifics.

Here is an example use case. 

To sign up for a new application or site, you need to agree to the app’s terms of use. Health officers require patients to sign consent forms before sharing private information with labs and insurance firms.

Software updates, online purchases, and bank transactions are all possible due to adhesive invisible contracts. Financial institutions, business-to-business (B2B), and business-to-consumer (B2C) contexts use different variants of adhesion agreements to legalize interactions.

Other use cases of adhesion contracts include:

• terms and conditions
• non-disclosure agreements
• software licenses
• medical or veterinary agreements
• loan contracts
• rental documents.

What are the challenges and controversies of adhesion contracts?

All kinds of adhesion contracts share similar characteristics that sometimes make it difficult to comprehend or manage. Their features include:

Non-negotiability

Most contracts go through a negotiated drafting process, but this doesn’t apply to adhesion contracts. One party crafts the agreement to be signed by another, who has no rights to modify or negotiate the terms of the deal. 

Negotiation requires a little more time as both parties make an input on their preferred terms. However, the non-negotiability of adhesive contracts makes them easier to create and issue. The recipient only engages with the agreement on a take-it-or-leave-it basis.

Boilerplate language

Most often, the fine print is riddled with jargon and contractual language too sophisticated for some readers. It’s almost like the terms are written to dissuade the signer from reading further so they can sign quickly. 

Before you sign anything, understand the terms, weigh your options, and know your rights concerning that situation. You should be able to spot sneaky provisions coated in ambiguous language in order to protect your self-interest.

Standardization

As with most standard operations, the team wants to be sure you’re allowing them to use your data for business analytics to improve their services. For example, the rental service needs to know that you’ll move out once your tenure expires. 

While the terms are not to be customized, the other party still reserves the right to walk away without signing anything. 

Enforceability

Seeing that adhesion contracts present a lot of constraints, especially for the signer, are they actually enforceable?  The answer is yes. Adhesion contracts are enforceable under the Uniform Commercial Code (UCC) in most US states. 

However, courts usually consider several factors to decide whether the terms are unconscionable to the party signing them.

If the contract is clearly not one-sided or capable of manipulating the signing party, it can withstand judicial scrutiny. Otherwise, the court can dismiss and invalidate it.

What are the benefits of adhesion contracts?

Despite the cons of an adhesion contract, they are useful in the following business contexts:

Streamlined services

For businesses that support lots of clients with similar goods, such as in SaaS, boilerplate agreements are standard contracts used to onboard new users. 

Instead of drafting separate agreements every time you acquire a new customer, you can use an adhesion contract for an infinite number of people. It streamlines repetitive business affairs to make you efficient at high-volume supply.

Protection of rights

The drafting party uses adhesion contracts to authorize any exchange that occurs when transacting business with the public.  The contracts are essential to protect their rights as they legalize access to the signer’s information, intellectual property, or electronic data. 

Choosing to accept the terms means the seller has rights to whatever is stated within the agreement.

Ease of transactions

Customers benefit from contracts of adhesion, albeit indirectly. Since it standardizes contracts, transactions become easier and faster to close. 

Imagine reading a contract before every purchase—you may need a lawyer to keep up. These types of agreements make it easy to sign mortgage loans, health care, insurance, and airline tickets. 

Freedom of choice

Although the business drafting the contract seems to have higher bargaining power, the other party is not bound by anything until they sign. 

You can’t make changes to an adhesion agreement, but you can take your business elsewhere if the terms are not right for you. 

Adhesion contracts are a way for buyers to consider all their options. You can turn down one supplier to choose the offering that best suits your needs.

Substantial fairness

Looking at the nature of these contracts, it’s easy to question whether the process is fair at all. However, proper scrutiny shows that each party has some level of bargaining power. 

In a trade scenario, the seller states their terms for the buyer to decide if it’s worth the exchange. 

Adhesion contracts can be declared void if the seller has drastically higher bargaining power, which disadvantages the buyer. 

Conclusion

Companies of all sizes use adhesion contracts to standardize their transactions with high-volume clients. 

But you must understand the benefits and risks before you lock in any agreement. As a business crafting terms of use for customers, make sure the terms are reasonable and generic to client needs. 

Make sure you get your legal adviser to review the agreement to confirm its enforceability. This way, the customer will not feel cheated and can trust you with their data or information.