Adhesion Contract

DEFINITION of 'Adhesion Contract'

A contract in which one party has substantially more power than the other in creating the contract. For a contract of adhesion to exist, the offeror must supply a customer with standard terms and conditions that are identical to those offered to other customers. Those terms and conditions are not negotiable.

BREAKING DOWN 'Adhesion Contract'

An example of an adhesion contract is an insurance contract. In an insurance contract, the company and its agent has the power to draft the contract, while the potential policyholder only has the right of refusal; he or she cannot counter the offer, or create a new contract for the insurer to agree to.

Before signing an adhesion contract, it is imperative that you read it over carefully, as all the information and rules have been written by the other party.

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