# Adhesion Contract: Definition, History, and Enforceability

## What Is an Adhesion Contract?

An adhesion contract is an agreement that usually has non-negotiable [terms and conditions](https://www.investopedia.com/terms/f/fineprint.asp). 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](https://www.investopedia.com/terms/b/boilerplate.asp) contracts.

### Key Takeaways

*   Adhesion contracts are "take it or leave it" agreements where you must accept the contract or walk away.
*   Adhesion contracts are meant to simplify business transactions by standardizing the agreement between the supplier and the buyer.
*   To be enforceable, adhesion contracts cannot be unreasonably one-sided.
*   Courts ultimately decide what is reasonable within an adhesion contract.
*   The legal view of such contracts has evolved over time and may differ across jurisdictions.

## Understanding Adhesion Contracts

Adhesion contracts are often used for insurance, [leases](https://www.investopedia.com/terms/l/lease.asp), vehicle purchases, mortgages, and other transactions where there is a high volume of customers who fit a standard form of agreement.

For instance, with an [insurance contract](https://www.investopedia.com/articles/pf/06/insurancecontracts.asp), the company and its agent have the power to draft the contract, while the potential policyholder only has the right of refusal. In other words, the customer cannot counter the offer or create their own, new contract to which the insurer could agree. 

It is important for consumers to read an adhesion contract carefully, as all the information and rules have been written by the other party.

### Contract Regulation

Adhesion contracts are usually enforceable in the United States according to the [Uniform Commercial Code (UCC)](https://www.investopedia.com/terms/u/uniform-commercial-code.asp). The UCC helps to ensure that commercial transactions take place under a similar set of laws across the country.

Although the UCC is followed by most U.S. states, it has not been fully adopted by some jurisdictions such as American Samoa and Puerto Rico. Louisiana stands alone among the 50 states in adopting only parts of the UCC.

The UCC has specific provisions relating to adhesion contracts for the sale or lease of goods. Contracts of adhesion are, however, subject to additional scrutiny and interpretation under state law.

## History of Adhesion Contracts

Adhesion contracts started to become part of the U.S. legal system only after the _Harvard Law Review_ published an article on life insurance contracts by Edwin W. Patterson in 1919. Subsequently, most courts accepted the idea of contract adhesion, due in large part to a Supreme Court of California case that supported adhesion analysis in 1962. 

The specifics of the legality and enforceability of adhesion contracts have changed over time. The case law and interpretation may vary from state to state, but it is generally agreed that adhesion contracts are an efficient way to handle standardized transactions.

When used properly, adhesion contracts save companies and customers time and the expense relating to obtaining contract advice from attorneys. However, soome aspects of adhesion contracts pose problems.

For example, in certain cases, electronic adhesion contracts signed online have been challenged in court because contract details were so difficult to access and review. As a result, electronic adhesion contracts must provide the accessibility of contracts that a consumer would receive and read offline.

> **Important**
>
> Often, courts won't enforce "browse-wrap" electronic contracts that require consumers to click through a number of links to find and read the various terms of a contract and agree to it. However, "click-wrap" electronic contracts that simplify this process by efficiently providing all the text and a click-to-accept method in one place typically are upheld by courts.

## Enforceability of Adhesion Contracts

For a contract to be treated as an adhesion contract, it must be presented as a "take it or leave it" deal. This means that one party has no ability to negotiate with the party offering the contract.

Adhesion contracts are subject to scrutiny that usually comes in one of two forms:

### Reasonable Expectations

Courts have traditionally used the doctrine of reasonable expectations to test whether an adhesion contract is enforceable. Under this doctrine, specific parts of an adhesion contract or the whole contract may be deemed unenforceable if the contract terms go beyond or don't match what the weaker party would have reasonably expected.

Whether a contract is reasonable depends on the prominence of its terms, the purpose of the terms, and the circumstances surrounding acceptance of the contract.

### Unconscionability

The doctrine of unconscionability has also been used in contract law to challenge certain adhesion contracts. It is a fact-specific doctrine arising from, again, equitable principles, and specifically, the idea of bargaining in good faith. Unconscionability shifts the focus from what the customer might reasonably expect to the motive of the supplier.

Unconscionability in adhesion contracts usually comes up if there is an absence of meaningful choice on the part of one party due to one-sided contract provisions combined with unreasonably oppressive terms that no one would or should accept.

Simply put, if the contract is exceptionally unfair to the signing party, it can be declared unenforceable in court.

Unconscionability is easier to argue if the supplier is making a significant profit from the agreement, especially if the amount of profit is tied to the weaker party's lack of bargaining power.

Some legal experts have pushed back on this approach as it has implications concerning the freedom of contract. That's the legal concept that people can freely determine the provisions of a contract without government interference.

## Where Are Adhesion Contracts Used?

You usually encounter them when you're arranging for airline tickets, insurance policies, mortgage loans, health care, or the purchase of an automobile.

## Do Consumers Benefit From Adhesion Contracts?

Yes, generally speaking, because it standardizes contracts and makes transactions faster and easier to conduct. If consumers had to read every contract for every purchase they make or hire a lawyer to review them on their behalf, it's possible that far fewer transactions would take place. Despite that, it's important to understand the terms of any adhesion contract provided to you.

## What Happens if I Don't Agree to an Adhesion Contract?

While you can't make changes to an adhesion contract, if you don't like what it states, you can turn it down and go elsewhere to make your purchase.

## The Bottom Line

Adhesion, or standardized, contracts require that one party to a transaction, e.g., the consumer who wishes to purchase a product or service, agree to all terms and conditions prepared by the other party to the transaction, e.g., the supplier of the product or service.

They are typical in many types of consumer transactions. Nonetheless, be sure to read the adhesion contract that's offered to you carefully before signing it.

> **Article Sources**
>
> 1.  Cornell Law School, Legal Information Institute. "[Adhesion Contract (Contract of Adhesion)](https://www.law.cornell.edu/wex/adhesion_contract_%28contract_of_adhesion%29)."
>     
> 2.  U.S. Government Publishing Office. "[Code of Federal Regulations: Title 7 - Agriculture, Subtitle B, Chapter XVIII, Subchapter H, Part 1941, Subpart B, Section 1941.57 - Security Instruments](https://www.govinfo.gov/content/pkg/CFR-2006-title7-vol13/xml/CFR-2006-title7-vol13-sec1941-57.xml)."
>     
> 3.  Louisiana Secretary of State. "[What is Uniform Commercial Code?](https://www.sos.la.gov/BusinessServices/UniformCommercialCode/WhatIsUniformCommercialCode/Pages/default.aspx)"
>     
> 4.  Patterson, Edwin W. “[The Delivery of a Life-Insurance Policy](https://www.jstor.org/stable/1327161?seq=1).” _Harvard Law Review_, vol. 33, no. 2, Dec. 1919, pp. 222. Download PDF.
>     
> 5.  Zhang, Mo. "[Contractual Choice of Law in Contracts of Adhesion and Party Autonomy](https://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1212&context=akronlawreview)." _Akron Law Review_, vol. 41, no. 1, 2008, pp. 123.
>     
> 6.  PandaDoc. "[Everything You Need to Know About Electronic vs Traditional Contracts](https://www.pandadoc.com/blog/difference-between-electronic-contracts-and-traditional-contracts/)."
>     
> 7.  Cornell Law School, Legal Information Institute. "[Unconscionability](https://www.law.cornell.edu/wex/unconscionability)."