Adhesion contracts are a standard form of agreement in which one party must adhere to the unbargained-for terms of a contract presented by another party. These types of contracts are often used to simplify business transactions involving goods or services and are commonly found between consumers and corporate entities. A consumer often has no choice but to sign an adhesion contract presented to them by a corporation as a ‘take it or leave it’ contract.

Adhesion contracts are legally binding, however, the courts have the discretion to decide what is considered to be legally binding and what is not. This occurs due to the disparity of the bargaining power between consumer and the corporate entity, who owns and created the agreement. For example, the consumer can not easily negotiate the terms of the contract and must sign it as presented or otherwise walk away from the transaction.

In order to be legally valid, an adhesion contract must include all essential elements of a valid contract, such as a clear agreement between both parties, a valid offer and acceptance, consideration, and capacity. Consideration is the legal value offered, accepted or promised by both parties in exchange for the performance of a contract. It is essential, since without consideration a contract may not be legally enforceable. Furthermore, the contract must also include all essential terms, so that there is no ambiguity as to its contents.

Additionally, courts apply a reasonableness test to determine if an adhesion contract is enforceable. This means that a court must decide if the contract is reasonably fair to both parties and that one party did not have an unfair advantage due to restrictions imposed by the other party. A court may decide that certain parts of the contract are unenforceable because of the language in it or because one party was unduly influenced or under pressure. It is up to the court to decide if any part of the contract is unenforceable and to enforce the remaining valid parts of the contract.

Although ‘one-sided’ adhesion contracts are not enforced, it is important for those in business to ensure that the contracts they present to another party are fair and balanced, in order to minimize any potential disputes or possible legal actions. When an adhesion contract cannot be agreed upon, it is recommended that either party consult a lawyer or mediator to help them reach a settlement.