Adhesion Contract

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Implied Contract

    A legal substitute for a contract. An implied contract is an ...
  2. Implied Authority

    An agent with the jurisdiction to perform acts which are reasonably ...
  3. Amendment

    1. A change to one of the terms of a contract. Any type of contract ...
  4. Addendum

    An attachment to an a document such as an insurance policy that ...
  5. Breach Of Contract

    Violation of any of the agreed-upon terms and conditions of a ...
  6. Negotiable

    1. Describing the price of a good or security that is not firmly ...
RELATED FAQS
  1. What is the difference between moral hazard and adverse selection?

    Adverse selection occurs when there's a lack of symmetric information prior to a deal between a buyer and a seller, whereas ... Read Full Answer >>
  2. What is the difference between an operating expense and a capital expense?

    An operating expense (OPEX) is an expense required for the day-to-day functioning of a business. In contrast, a capital expense ... Read Full Answer >>
  3. What does the lapse ratio in the insurance sector measure?

    The lapse ratio measures the amount of insurance policy renewals with respect to the total number of insurance policies at ... Read Full Answer >>
  4. Why some insurance policies are more expensive than others?

    There are several reasons that an insurance policy can cost more or less at different agencies. Some of the more common reasons ... Read Full Answer >>
  5. Why should I keep track of my insurance policy?

    The number one thing to remember about insurance is that, just like everything else, it changes over time. The top-of-the-line ... Read Full Answer >>
  6. Should I be worried about my insurance company?

    Yes, policyholders should always take a serious look at the financial stability of their current insurance company especially ... Read Full Answer >>
Related Articles
  1. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  2. Credit & Loans

    Watch Out For Changes In Credit Card Agreements

    If a credit card company changes its terms, you could pay a steep price. Find out how to stay informed.
  3. Home & Auto

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  4. Home & Auto

    Top Tips For First-Time Home Buyers

    Follow this step-by-step guide to make your homeownership dreams a reality.
  5. Home & Auto

    Attention Home Buyers! Why You Need A Lawyer

    Property transactions are complex and subject to specific state/local rules. A professional can simplify the process.
  6. Budgeting

    Extended Warranties: Should You Take The Bait?

    Avoid shelling out for these policies and you could save hundreds of dollars.
  7. Options & Futures

    Moral Hazards: A Bump In The Contract Road

    Learn how this phenomenon can cause a party in an agreement to behave differently than expected.
  8. Retirement

    IUL Insurance: An Alternative Retirement Plan?

    Indexed universal life insurance is the rise. But critics argue that wisely allocated IRA and 401(k) funds will normally offer better returns.
  9. Economics

    What is Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  10. Insurance

    Homeowners Insurance Losers: States That Pay Most

    Which states charge you the most for homeowner's insurance? Hint: They're regularly featured on the Weather Channel.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center