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What Business Owners Should Know About Contracts of Adhesion

contract of adhesionBusiness owners do not have the time to negotiate every line of every contract for every single deal, especially as their businesses grow and they gain more clients and customers. As a result, many choose to recycle their agreements with employees, vendors, or other third parties. These documents are also referred to as standard form contracts.[1]

Standard Form Contracts

Standard form contracts can be used in numerous situations, where the other party is willing to accept the terms without negotiation. When they are well written, standard form contracts can save time and resources. They can make the process of taking on new employees or clients much more efficient. Businesses wanting to save time and money by using form contracts need to take the utmost precautions in making sure the contracts would hold up in court. 

What is a Contract of Adhesion?

When a standard form contract is proposed by the party with superior bargaining power, and the recipient has no choice but to take it or leave it, it is a “contract of adhesion.” With a contract of adhesion, there is a very real possibility that the agreement is unconscionable. In addition, in the event of an ambiguity in the agreement, such ambiguity will be resolved contra proferentem against the party drafting the contract language.

How can a Contract of Adhesion Hurt Your Business?

Contracts of adhesion can cause issues if courts find that they indicate lack of notice, unfair surprise, or substantive unfairness.[2] Courts will consider the doctrine of reasonable expectations, basing their assessment on what the weaker party could have reasonably expected from the contract terms. 

If you are planning to use a form contract in your business, you need to make sure it is fair and will stand up to scrutiny. J. Muir & Associates can help you protect your company’s interests and prevent lawsuits with strongly drafted contracts. Our team of creative and talented lawyers is experienced in tackling business legal issues. Contact us at (786) 533-1100 to find out how we can help you with contracts of adhesion and more!

 

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