How to avoid an adhesion contract
Jan 18, 2024
The good, the bad and the ugly of adhesion contracts. Don’t get caught out by these one-sided contracts - find out the best contract for you.
Table of Contents
1. What is an adhesion contract?
2. Examples of adhesion contracts
3. Common clauses of adhesion contracts
4. Should you avoid adhesion contracts?
5. How to create an ethical, non-adhesive contract
6. Benefits of creating an ethical non-adhesive contract
- 1. What is an adhesion contract?
- 2. Examples of adhesion contracts
- 3. Common clauses of adhesion contracts
- 4. Should you avoid adhesion contracts?
- 5. How to create an ethical, non-adhesive contract
- 6. Benefits of creating an ethical non-adhesive contract
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Can you remember the last time you updated your phone? I’m sure you’re familiar with the contract that pops up.
A contract with writing so small you’d need a microscope to read, and so long you’d need to take the day off work to get through it. But you need to use your phone. You scroll to the bottom:
That is an adhesion contract – the ol’ take-it-or-leave-it.
Adhesion contracts are notorious for their lack of negotiable terms and conditions. These contracts give one party all the power and leave the other party to either sign on the dotted line or walk away.
Today we’ll cover everything you need to know about adhesion contracts so you can navigate them safely without getting caught out.
What is an adhesion contract?
An adhesion contract, also known as a standardized or boilerplate contract, is an agreement between two parties where one party wields the power by controlling all the terms and conditions.
The other party, often a consumer or employee, is presented with a “take-it-or-leave-it" offer and cannot negotiate or change the terms of the contract.
Examples of adhesion contracts
Signing a rental agreement for your new home? Upgrading to a flash new credit card? Creating a new account on your favorite website?
These processes likely use adhesion contracts.
From one perspective, they make business easy. Can you imagine Apple trying to negotiate two-way contracts with billions of people every time there’s a software update? Having one contract that can be easily signed saves a ton of time and admin for the company.
Here are some other examples of adhesion contracts:
- Insurance policies
- Many employment contracts - often those at large companies
- Software licenses
- Some rental agreements
- Banking policies
Common clauses of adhesion contracts
Adhesion contracts are made up of lots of technical jargon and clauses that can catch out customers or employees.
It’s important to read your contracts and understand what you’re signing up for. Yes, they’re tedious and difficult to decipher; but you might be signing your life away without realizing it. Imagine signing a Facebook contract that gives Mark Zuckerberg your cherished family dog, all because you overlooked the terms and conditions.
There are a few common clauses that you should understand when reading an adhesion contract. These are:
- Arbitration clause: a clause where parties resolve disputes through arbitration (using an alternative system to state courts). Companies favor arbitration as it is usually faster and less costly than litigation.
- Limitation of liability: this clause limits the liability of the deciding party. It mentions the highest possible damage amount that can be requested.
- Disclaimer of warranties: this is where disclaimers for warranties and guarantees are outlined. Consumers can be caught out here by limited guarantees for a product or service.
- Termination clause: this clause mentions the conditions under which each party can terminate the contract. Consumers and employers may find themselves trapped in contracts with stringent termination clauses.
Should you avoid adhesion contracts?
Adhesion contracts are used globally and aren’t going anywhere anytime soon. It’s better to understand what you are signing up for and exercise caution before you click the big green ‘Accept’ button.
As a consumer, adhesion contracts can only be a yay or nay. Next time you’re reading the terms and conditions from a big corporation, here are some ways you can protect yourself:
- Understand the terms: make sure you go through all the fine print in the contract, especially the parts about ending the agreement, fees and how disputes are resolved.
- Consider your options: if possible, shop for a provider that won’t lock you into an adhesion contract; or at least offers one with better terms.
- Determine your rights: knowing consumer protection laws in your region can allow you to challenge unfair contract terms if necessary.
For employees and renters, consider the following tips and tricks to navigate a sneaky adhesion contract:
- Negotiate: ask the contract-giving party if some of the terms and conditions can be negotiated.
- Know your rights: research your rights as an employee or tenant. The weight of adhesion contract clauses may differ depending on region.
- Document everything: when you sign a contract, make sure to get a copy of it in case the company tries to retroactively apply new terms in the future
- Get advice: for complex or longer-term contracts, it is best to seek advice from a lawyer.
How to create an ethical, non-adhesive contract
I'm sure you're wondering: what's the best alternative to signing an adhesion contract?
The most secure arrangement between two parties is to negotiate a bilateral, non-adhesive contract. This way, you can discuss the terms and conditions and ensure both parties are on the same page before signing off.
Benefits of creating an ethical non-adhesive contract
Comparing adhesion contracts to non-adhesive contracts is akin to grabbing a quick meal at a fast-food joint versus an experience at a fine dining restaurant.
Adhesion contracts are quick, easy and probably not that good for you. Non-adhesive contracts on the other hand can be talked through and tailored to your preferences.
The benefits of negotiating a non-adhesive contract are the following:
- Flexibility: parties can customize the contract to meet specific needs.
- Communication: negotiating contracts requires clear communication from both parties and reduces the likelihood of misunderstandings later on.
- Legal protection: non-adhesive contracts usually allow better legal protection for both parties involved.
- Fair bargaining power: neither party is forced into accepting unfair terms.
- Adaptable: a non-adhesive contract can easily be amended if both parties agree.
There you have it - the good, the bad and the ugly of adhesion contracts. How to approach them and how to avoid them.
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