As a business owner, it’s likely that you deal with contracts on a regular basis. However, not all contracts are created equal, and some may have a more significant impact on your business than others. One such type of contract that’s worth paying attention to is an adhesion contract.
But what exactly are contracts of adhesion, and how can you properly and effectively use one for your organization?
Here, we’ll elaborate on the legal considerations and best practices when drafting adhesion agreements. In the end, we’ll also offer you an all-in-one solution to help you streamline your contract management processes.
What Is a Contract Of Adhesion?
A contract of adhesion is a type of legal agreement with non-negotiable terms and conditions. Essentially, it grants one party with greater bargaining power, while the counterparty is bound to accept those terms without question. Otherwise, the latter cannot sign the agreement if the terms are perceived to be disagreeable.
In other words, a contract of adhesion is a “take it or leave it” and an “as is” transaction. It ceases to be an adhesion contract should an offeror gives in to the demand of the offeree. But since this agreement type is most common among large companies with multitudinous clients, negotiations are burdensome.
Hence, the solution is to produce a non-negotiable contract with reasonable terms that a purchasing party can read and accept. A contract of adhesion is also called a boilerplate or standard form contract.
Are Contracts of Adhesion Enforceable?
In the United States, contracts of adhesion are enforceable, thanks to the Uniform Commercial Code (UCC). This piece of legislation contains provisions regarding contract adhesions for the sale or lease of goods and services. Among 50 US states, only Louisiana stands to not have fully adopted UCC.
Be that as it may, adhesion contracts are subject to additional legal scrutiny under state laws. If a court finds that a contract adhesion holds oppressive terms, the agreement may be rendered null and void. So, to keep the enforceability of adhesion contracts, there must be no unconscionable provisions blatantly outlined in the legal document.
Legal Considerations for Businesses
While the non-negotiability of an agreement constitutes an adhesion contract, this doesn’t give offerors the license to abuse the terms. As such, legal considerations must be factored in among businesses when drafting enforceable adhesion contracts. Namely:
Ensuring fairness and reasonableness
When drafting contract adhesions, businesses must see to it that the terms are fair, just, and reasonable for all customers. Ideally, it must be fair enough to not prompt a party with no bargaining power to pursue a legal case. Ensuring fairness in drafting contract adhesions frees your organization from liability and the offeree from unfair terms.
Compliance with applicable laws and regulations
In every binding agreement, irrespective of type, compliance with applicable laws and regulations is likewise non-negotiable. It is indispensable that no federal, state, or international laws will be violated or infringed upon. Contracts must be issued for signing among clients without the prospect of arousing a legal dispute.
Best Practices for Drafting Fair Contracts
Avoid costly legal mistakes and reputational damage by following these best practices for drafting fair and just contracts:
Use clear and unambiguous language
The sheer choice of words is extremely important when outlining terms and conditions. Hence, it must be clear-cut, concise, and unambiguous so that the consumer will not demand any clarification. In addition, it must be free from any industry jargon that will only confuse a reader. Instead, use simple and straightforward sentences.
Ensure essential terms are reasonable
Adhesion contracts are enforceable provided that no one-sided terms will disadvantage the party with no bargaining power. In consequence, it is imperative that the terms are reasonable and within the bounds of all applicable laws.
Address potential disputes and remedies
In order to address potentially unfair contract conditions, an adhesion contract must be reviewed from the perspective of a consumer. In this approach, you can determine if certain terms have to be changed, remedied, or removed altogether down the road.
After this, you can update your contracts accordingly and issue an updated version of the contract to future customers.
Seeking legal advice and counsel
When all else fails, seeking counsel or a legal professional’s expert advice is doubtless a wise and logical decision. A qualified lawyer can review your contracts and guide what part of the contract needs improvement, if any.
Also, a legal professional can help clarify if your legal document contains inequitable provisions. By extension, they can assist and advise you on your next best steps to rectify the situation.
Contract of Adhesion Examples
As mentioned, contracts of adhesion are commonplace among industries doing business with a large volume of clients. Below are just some examples of contracts of adhesion in some of the busiest sectors in the world today.
Insurance
An insurance company and even a real estate agent have the power to draft an adhesion contract. Meanwhile, the would-be policyholder can only refuse an agreement, and not have the power to demand changes to the contract. This makes it absolutely essential to read through an entire agreement solely written by one party.
Internet Service Providers
ISPs are one of the major industries dealing with many customers worldwide. It is only fitting and convenient that such companies would opt to use adhesion contracts with non-negotiable provisions. This is the simplest and fastest way to get a deal done between the company and its purchasing clients.
Leases
Another common usage of adhesion contracts is through leases. Such an agreement puts the lessee in a position where she can only agree to the terms and conditions. Otherwise, the tenant can respectfully walk away and find another property lessor more amenable to negotiations.
Manage Your Contracts With Ease Using Fill
Manual processes are tedious and unnecessarily time-consuming. Shift to digital contracting and manage your legal documents with ease using Fill. Here’s how you can make the most of our dependable online solution:
Use a contract template instead of writing from scratch
Drafting an adhesion contract from scratch is labor-intensive and counter-productive. Simplify the drafting process by utilizing one of Fill’s contract templates depending on your needs. Once you made the choice, you can modify the template and incorporate your company logo for custom branding.
Request for legally-binding electronic signatures
One of the key benefits of using our integrated solution is legally binding digital signatures. As such, you can request eSignatures from your clients anytime, anywhere. Our eSignature tool also complies with industry laws such as HIPAA, UETA, and ESIGN Act. This guarantees that your electronically signed documents carry ample legal weight.
Send or schedule contract reminders
To seamlessly manage your contracts, take advantage of Fill’s real-time audit trails and instant alert features. With it, you can send and schedule contract reminders to ensure you meet your deadlines. Additionally, our platform lets you track document progress by notifying you whether a contract has already been opened or signed.
Fill: An All-In-One Solution for Your Contract Management
Fill is an electronic signature provider helping businesses of all sizes to streamline their contract management workflow. We do this by offering quality features in addition to producing binding eSignatures. This includes free templates, a centralized online repository to store contracts securely, and real-time audit trails to automate audit reports.
What is more, all your documents are safe from security breaches with our military-grade encryption protocols. To ensure only authorized employees can access your contracts, you can run multiple verification and authentication checks. This feature practically makes your documents utterly safe from all forms of security breach attempts.
Fill walks the talk. Experience convenience and efficiency with your contract management workflow and invest in our integrated digital solution. Sign up today for free.
