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Definition of Adhesion Contract

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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.

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In an adhesion contract, one party has substantially more power than the other in creating the contract. For a contract of adhesion to exist, the offeror must supply a customer with standard terms and conditions that are identical to those offered to other customers

Those terms and conditions are not negotiable. An example of an adhesion contract is an insurance contract. In an insurance contract, the company and its agent has the power to draft the contract, while the potential policyholder only has the right of refusal; they cannot counter the offer or create a new contract to which the insurer can agree. Before signing an adhesion contract, it is imperative to read it over carefully, as all the information and rules have been written by the other party. Adhesion contracts are usually enforceable in the United States since the Uniform Commercial Code is followed by most American states and has specific provisions relating to adhesion contracts for the sale or lease of goods. Contracts of adhesion are, however, subject to special scrutiny. Adhesion contracts as a concept originated in French civil law, but did not enter American jurisprudence until the Harvard Law Review published an influential article by Edwin W. Patterson in 1919. Subsequently, most American courts adopted the concept, helped in large part by a Supreme Court of California case that endorsed adhesion analysis in 1962.

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In sum, an adhesion contract is an imbalanced contract where one of the parties has all of the power

Adhesion contracts are also frequently called standard form contracts or boilerplate contracts because they are never changed. In other words, the contract is basically a 'take it or leave it' agreement because there is no bargaining or negotiating at all. In the example above, the bank would be the party in power, since it is lending you the needed money. Adhesion contracts are used in many different industries. Some types of industries where adhesion contracts are utilized include property leases, deeds, mortgages, insurance matters, car purchases and other types of situations where one party needs to borrow money or property to complete a transaction.

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