As an individual and as a business owner, you’ve probably signed more contracts than you realize as our world is full of standard form contracts you agree to when you log onto a website, download a new piece of software, order from a supplier, or purchase insurance. In many cases, you don’t have the opportunity to negotiate these contracts nor the negotiating power to do so even if you wanted to.
Adhesion Contract
When a contract is drafted by one party, generally the party with the stronger bargaining power, and signed by the other individual or smaller business owner, and the second party does not have the power to negotiate or modify terms, then it could be an adhesion contract. These types of contracts come under more scrutiny from the court, particularly if the contract is for a product or service you have to have for your business and cannot otherwise obtain.
You would likely be surprised, however, at what you can negotiate. We often help clients negotiate leases with their landlords, even if the landlord is a large business. Doctors’ practices can negotiate rates with insurance companies, though individuals and small businesses rarely have the power to negotiate their rates. You can even negotiate terms with software companies, cell phone providers, and others, though it generally helps to have your business attorney reach out to their legal team and a give a good reason why they should work with you. These businesses do not want courts to find that their documents are adhesion contracts and so are likely to work with you if your request is reasonable.
Court Scrutiny of Adhesion Contracts
If a court finds that a contract involved in a dispute is an adhesion contract, then they have the ability to void certain provisions of the contract due to the unequal nature of the bargaining power. If a provision is clearly unfair or unconscionable, contains an unfair surprise, a lack of notices, or another form of substantive unfairness, then it may not hold up in court. The judge will look at the nature of the agreement, the parties involved, any attempts to negotiate, and other factors to make this determination.
Courts can apply the “doctrine of reasonable expectations” in order to invalidate part or all of a contract they determine to be an adhesion contract and then not hold the parties to the agreement. The weaker party will not be held to any terms the court finds unreasonable, even if those terms are part of the language of the agreement.
Growing Use of Click-Through Agreements
It is hard, however, to have anything but an adhesion contract when providing software and services to millions of users every day. Even the biggest legal department could not handle negotiating with everyone who would want to change the terms. Generally, these electronic agreements are as valid as their paper counterparts so long as they are reasonable with what the weaker party can expect from the arrangement. Courts have taken different approaches to trying to encourage consumer understanding of these standard agreements, from requiring larger fonts and bigger spacing, to making consumers scroll through the entire agreement before clicking that they agree.
Contracts are often the source of a business law dispute and they may even be contracts you barely remember agreeing to in the first place. If you’re facing a business lawsuit, reach out to the experienced team of litigators at the Dunn Law Firm. We understand business litigation and contract law and can help you understand your case and position. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 and set up a free consultation today.
