Signing contracts is part of our everyday lives. As an individual or a business owner, you have probably signed many different contracts over the years. Some contracts are simple, like signing a credit card receipt after purchasing food. Other contracts are more complicated, such as loan contracts. Adhesion contracts are drafted by the more powerful party and do not allow the other party to change the contract terms. Mortgage loan documents, insurance contracts, and car loan documents are all adhesion contracts or contain at least one adhesion clause.
Discuss Your Case With an Adhesion Contract Attorney Today
Many people assume that they cannot negotiate the terms of an adhesion contract. They may assume they have to sign the contract. The attorneys at Jones Gregg Creehan & Gerace are well-versed in Pennsylvania contract law. We protect business owners and individuals from adhesion contracts regularly. If you would like to write an adhesion contract or have an attorney review an adhesion contract, our business law attorneys are here to help. Contact Jones Gregg Creehan & Gerace today to schedule your initial consultation.
What Is an Adhesion Contract?
Adhesion contracts are contracts between two parties in which the party drafting the contract has stronger bargaining power than the other party. Adhesion contracts are often called boilerplate contracts, take-it-or-leave-it contracts, or standard form contracts. The party that has
more power is usually a business that drafts up the agreement. In most cases, the other party has less power and does not have the option to modify the contract terms or try to negotiate better terms.
Since one of the parties signing the agreement has a more powerful bargaining position, the weaker party must adhere to the contract and its provisions. The party with a weaker bargaining status forfeits the opportunity to negotiate or change the terms of the deal. As a result, adhesion contracts favor the stronger party, especially when the stronger party has something that the weaker party wants and can’t get easily through other means.
An example would be signing a car loan agreement. The person taking out the car loan agreement wants to but can’t do so without credit. This situation puts the party purchasing the vehicle in a weaker position as they typically need to take the contract or leave it. If the person purchasing the car tried to negotiate the contract, the dealer would probably walk away from the deal.
Different Types of Adhesion Contracts
You may not be able to recognize an adhesion contract right away clearly. Some adhesion contracts are more subtle. An example of an adhesion contract would be being asked to agree to the terms and conditions when you visit the website. If you don’t check the terms and conditions, you will not see the contract. This is an example of an adhesion contract. Adhesion contracts are also common in the following situations:
- Home leases
- Insurance coverage
- Car buying
- Mortgages
- Auto repair services
- Home contractor services
- Medical services
- Veterinary care
- Dental services
- Cable services
- Cell phone providers
In some cases, a personal injury attorney may witness parties trying to turn a settlement agreement into an adhesion contract. Doing so may happen before the personal injury attorney agrees to take on the case. The party being sued may try to overpower the victim in the lawsuit by offering them a settlement. However, the settlement agreement may end up being more like an adhesion contract that the victim feels obligated to sign as a take-it-or-leave-it document.
Are Adhesion Contracts Legal?
Yes, adhesion contracts are legal unless they violate Pennsylvania contract law or are unconscionable. Proponents of adhesion contracts claim that these contracts are good because they bring uniformity, cut down negotiation time, and streamline the legal process. While these can be benefits of an adhesion contract, adhesion contracts are not all legally valid. In some cases, the party holding power engages in a one-sided bargain that a court may strike down as unconscionable.
Suppose there is a question about whether the contract is unconscionable. In that case, a court will examine the contract to determine whether the party with more bargaining power used their power to bind the contract unlawfully. One party cannot use its power in a way that is unenforceable, unfair, or unconscionable. If the contract has been deemed unfair, the court may choose to strike the clause or clauses that are unconscionable. Alternatively, the court may scrap the entire contract and require the parties to negotiate a new contract.
Can I Terminate an Adhesion Contract?
It may be possible for you to terminate the adhesion contract if you can prove that it should be terminated with just cause. Remember that many contracts, such as adhesion contracts, do have their benefits. Discussing your case with an attorney can help you evaluate whether it’s worth pursuing the termination of the adhesion contract. In some circumstances, adhesion contracts will cause significant problems if they are not handled correctly. There are several legal grounds through which you may be able to cancel an adhesion contract, including:
- Termination for insolvency: the party has become unable to pay debts
- Termination for cause: default or failure to uphold a critical element of the contract by either party
- The contract is for a specified, fixed period and has ended or expired
- Termination force majeure: the obligations under the contract are impossible to uphold because of events outside of the party’s control
- Both parties voluntarily agree to end the contract
Contact a Pittsburgh Adhesion Attorney Today
At Jones Gregg Creehan & Gerace, our Pittsburgh contract attorneys are trained to comb through adhesion contracts carefully. We will review the contract and look for any red flags that we can negotiate against on your behalf. We also have significant experience drafting contracts with adhesion clauses in them that are legally enforceable. Contact Jones Gregg Creehan & Gerace today to schedule your initial consultation to learn more about our adhesion contract services.