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.

RELATED TERMS
  1. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  2. Contract Unit

    The actual amount of the underlying asset represented by a single ...
  3. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
  4. Contract Month

    The month in which a futures contract expires. The contract can ...
  5. Delivery Date

    1. The final date by which the underlying commodity for a futures ...
  6. Front Month

    Used in futures trading to refer to the contract month with an ...
Related Articles
  1. Professionals

    Contract Characteristics

    Contract Characteristics
  2. Professionals

    Contract Requirements

    Contract Requirements
  3. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  4. Markets

    Intermediate Guide To E-Mini Futures Contracts - Rollover Dates And Expiration

    A contract month is the month in which a futures contract expires. All of the e-mini stock index futures contracts trade on the March quarterly expiration cycle (March, June, September and December). ...
  5. Professionals

    Other Types of Derivatives

    CFA Level 1 - Other Types of Derivatives. Learn four other types of derivative contracts, including the characteristics of Eurodollar futures, currency and stock index contracts.
  6. Professionals

    FINRA Conduct Rule 2820

    FINRA/NASAA Series 26 Section 7 - FINRA Conduct Rule 2820. In this section variable contracts, receipt of payment, transmittal, selling agreements, redemption and member compensation.
  7. Professionals

    FINRA Conduct Rule 2820: Variable Contracts

    FINRA Series 6 Exam Study Guide - FINRA Conduct Rule 2820: Variable Contracts. About Variable contracts under NASD rule 2820 and Includes definitions, receipt of payment, transmittal, selling ...
  8. Professionals

    Terminating a Forward Contract Prior to Expiration

    CFA Level 1 - Terminating a Forward Contract Prior to Expiration. Learn how to terminate your position in a forward contract through use of an offset. Discusses default risk upon terminating ...
  9. Investing Basics

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  10. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
RELATED FAQS
  1. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  2. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  3. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  4. What does a futures contract cost?

    Learn about values of futures contracts and the initial margin a trader must place in an account to open a futures position, ... Read Answer >>
  5. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  6. What is a tax-free 1035 Exchange?

    A Section 1035 Exchange refers to the replacement of an annuity or life insurance policy for a new one without incurring ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center