Adhesion Insurance Contract

Whether we know it or not by name, most of us have affixed a signature of at least one adhesion contract in our adult lives. An insurance policy is classified to be an adhesion contract including an apartment lease or a EULA or End User’s Licensing Agreement. It also includes the agreement between you and a dry cleaner or other professional service.

Basically, an adhesion contract is a form of a take it or leave it contract or agreement between two individuals or two parties in which one is stronger and superior than the other. For instance, the stronger party, an insurance company, provides products and services to the weaker party’s needs and wants. Instead of negotiating each aspect of the agreement, the insurance provider presents to the potential customer the standard policy or contract composed of pages in legal language. Since the customer wants an insurance policy, then he or she may need to take a look on the contract and signs it once approved in his or her good faith.

From that point of view, the customer is bound to the terms and conditions mandated on the adhesion contract legally, even if he or she may not have an input into the terms. This may not bring a big problem to the weaker party since he or she is assured that he or she will be receiving benefits from the signed insurance contract. This is similar to the signer of a EULA or someone who is signing for a lease. Generally, an adhesion contract is not really a dire arrangement for the weakest party provided that the terms agreed upon are met.

The hardest part of an adhesion contract starts when the stronger party tends to violate the agreed terms in the contract. The fine print and the language of the whole contract when not carefully examined by the prior weaker party may protect the stronger party for any legal ramifications. For instance, an adhesion contract in an insurance company which includes a clause that prohibits class action lawsuits, this may secure the company from any lawsuits. Furthermore, there are also certain restrictions in terms of where the lawsuit can be filed, or in some cases the customer may be unaware of utilizing an arbiter rather than a judge. The clauses that may protect the stronger party are very common in many adhesion contracts. This is the reason why weaker party needs to read and understand the whole context of the contract before signing it.

Luckily for the weaker party, American government and courts have created a legal enforcement prior to adhesion contract. Generally, the terms implies that the original contract is considered to be binding and valid but now, the weaker party has the right to argue that the terms are completely ambiguous. If this has been proven and approved by the court, then the weaker party prevails in the proceedings. This is the reason why most entities that employs standard contracts ask for help from legal professionals to ensure that the terms are reasonable and legal.