Contracts are agreements between two or more parties that create legal obligations that each side is required to perform. Once the contact is formalized, the parties then become legally bound to fulfill their contractual obligations, which may include providing goods or making payments.
In order for a contract to be legally enforceable, the parties must exchange something of value, called consideration. Consideration is, in many cases, payment for goods or services by a buyer and the delivery of those goods or services from the seller.
Consideration in contracts helps to ensure that a bargain is involved, not just the mere giving of a gift. A contract provides the parties who are involved with certain contract rights.
When the parties are forming the contract, they will typically negotiate for various terms and provisions to be in their favor. For example, they may negotiate regarding:
- The quality of materials to be used;
- The delivery date;
- Payment amounts; and
- Other contractual rights.
Offer and acceptance are other important contract issues. An offer, for example, is an individual who offers to purchase a used car for $12,000 at a dealership.
Acceptance occurs if the dealership agrees to sell the vehicle for that price. Forming contracts can be a complex process.
Contracts often include common clauses, such as:
- Payment amounts;
- When payment must be delivered;
- The types of services or goods which are being sold;
- When the services or goods are required to be performed or delivered;
- Whether the contract can be assigned to another party; and
- Remedies in the event of a breach.
It is important to have the assistance of a lawyer when creating a contract, especially in the contract and drafting review stages. This may prevent contract disputes or future contract violations.
An oral contract may also be legally binding, depending upon the way it is formed and the subject matter of the contract. As a general rule, however, it is better to formalize a contract in writing so that it may be referenced in the future.
The requirements for oral contracts can vary by state and according to the subject matter of the contract. Each party to a contract has a general duty to read a contract so they are aware of the terms and their corresponding duties.
What is an Adhesion Contract?
A contract of adhesion is a standardized agreement. An adhesion contract has a take it or leave it basis.
If an individual does not agree to the terms of the contract, they will not be able to acquire products or services. There is not an opportunity to negotiate regarding any of the terms of the contract.
Are Adhesion Contracts Commonly Used?
Adhesion contracts are used in many different commercial settings due to their efficiency because they are standardized forms. Common forms of adhesion contracts include:
- Insurance policies: Almost all insurance policies are contracts of adhesion. As the insured, an individual has no power to bargain and they either take the insurance policy or they do not;
- Housing: If an individual attempts to rent an apartment or a house, they will be required to sign a lease. The lease is an adhesion contract because the terms are non-negotiable.The same thing applies to many other goods and services, including buying a car or ordering a computer; and
- Tickets: If an individual goes to a baseball game, a cruise, or valet park, most likely there will be some type of small print on the back of the tickets. This is considered an adhesion contract because once an individual purchases the ticket, they are bound by the terms of the small print contract even if they were unaware of its existence.
Am I Required to Read an Adhesion Contract?
Yes, the parties to a contract have a duty to read the contracts which they are provided. However, the party who drafted the contract has a duty to call attention to the printed terms.
In other words, the author of the contract has a duty to call attention to its printed terms. This means that the author must make the terms noticeable, especially if the cause or provision is not something which usually appears in contracts of the same type.
For example, an airline ticket will not typically require the ticket holder to pay a fee if they fail to appear for the flight. In most cases, an airline overbooks flights with the expectation that some individuals will not show up for their flights.
If the airline does require this type of fee, they are required to make the fee reasonably clear to its customers.
Can I Modify an Adhesion Contract?
Although it is theoretically possible to modify an adhesion contract, there are a number of issues. First, an electronic cohesion contract can be very difficult to modify because that would involve overriding the read-only function of the document.
Secondly, a lower level employee, such as a clerk, secretary, or salesperson, typically does not have the authority to accept a deal without obtaining authorization from a manager. Lastly, it is not uncommon for an adhesion contract to contain terms which prevent any handwritten modifications.
In order to have a valid contract, the parties must have a meeting of the minds. In other words, the parties must agree to the terms of the contract in order for that contract to be legally enforceable.
If the party that made the adhesion contract believes that it is the same contract that the individual handed back when, in fact, it had been modified, the contract is no longer considered valid. However, if the party holding back the contract called attention to the modifications, the company will likely not want to accept the new deal.
In order to modify an adhesion contract, a company is required to be aware of and consent to the modifications. That consent, however, will be difficult to obtain because negotiating an adhesion contract defeats the purpose of using a standardized contract.
Are Adhesion Contracts Always Enforceable?
Adhesion contracts are not always enforceable. An adhesion contract is almost always created by the stronger of the two bargaining parties.
The party with more bargaining power will often manipulate the terms of the contract to take full advantage of the situation. Because of this, many adhesion contracts may be unjust or unfair.
The language of adhesion contracts is also often difficult to understand. If an adhesion contract is at issue in a court of law, the court will hold the adhesion contract unenforceable if the contract is considered unjust or unfair.
When Are Adhesion Contracts Least Likely to Be Enforceable?
Although an adhesion contract is typically enforceable, they are judged by all of the surrounding circumstances. In other words, one of the factors alone may not invalidate the adhesion contact but, when considered together, the factors may cast the contract in a negative light.
The factors a court may consider prior to enforcing an adhesion contract includes, but are not limited to:
- Meeting of the minds, or whether the customer knew or could have known about the contract terms;
- Language, or whether the adhesion contract was deceitful or was understandable. If the contract is portrayed as an authorization form, it should not discuss the release of liability unless that is clearly labeled;
- Presentation, or whether the contract is in a hidden location or a location that is obvious to the other party. Small contracts on the backside of tickets are norman. Contracts buried in the middle of brochures are suspicious; and
- Location, or whether the contract was agreed to in a location which gave little time for the customer to read or consider the contract. Signing a contract from the comfort of the home will be very different from signing a contract while a line of people are waiting for the individual to finish.
How Can a Lawyer Help Me?
It is essential to have the assistance of a contract attorney for any issues, questions, or concerns you may have related to an adhesion contract. As previously noted, adhesion contracts will not be enforceable if they are deemed unfair or unjust.
Your lawyer can assist you by reviewing the contract, explaining the difficult language, and informing you of your contract obligations. Should a dispute arise, your lawyer can represent you in court.
