Adhesion: Don’t Get Stuck

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“Adhesion” is defined as the act of sticking or attaching to something.  Merriam-Webster.com. Merriam-Webster, 2015. Web. 13 March 2015.  Under Pennsylvania law, contracts of adhesion are standard form contracts prepared by one party, to be signed by the party in the weaker position, usually a consumer, who adheres to the contract with little choice about the terms.  Romero v. Allstate Insurance Co., 1 F. Supp. 3d 319 (E.D. Pa. 2014).  

Recently, we were involved with litigation where one of the parties signed a contract with a term similar to the following: 

"To the extent the Buyer commences legal proceedings against the Seller, and the Seller prevails, partially or completely, on any or all of its own claims or defenses to the Buyer’s claims leaving the Buyer with less than 100% recovery, Seller shall be entitled to payment by Buyer of all reasonable attorneys’ fees, expert witness fees, consulting fees, and all other costs or expenses, including the cost of Seller’s time associated with pursuing or defending the legal proceeding."

Under this contract term, if the Buyer initiated a legal proceeding seeking to recover $100,000, but only recovered $99,999, the contract requires Buyer to pay for all of the costs Seller incurred to defend the legal proceeding.  In the typical consumer situation where an individual in a weaker bargaining position signs a contract with a sophisticated business entity, this type of contract term would likely be found to be part of an adhesion contract.  The question would then turn on whether the term was unconscionable. 

A contract term is unconscionable, and therefore avoidable, where there was a lack of meaningful choice in the acceptance of the challenged provision and the provision unreasonably favors the party asserting it.  Salley v. Option One Mortgage Corp., 925 A.2d 115, 119 (Pa. 2007).  This is an argument easier made by an everyday consumer who signs a contract with a sophisticated business entity.  On the other hand, a business entity, even if it has less bargaining power than the business with which it signs a contract, will have a much weaker argument that a contract term was unconscionable.   

In a circumstance where a business fails to request revisions to oppressive contract terms, it becomes even less likely that the provisions would be found to be unconscionable.  Accordingly, it is imperative for businesses to conduct a full review of all contracts before putting pen to paper.  When unfavorable provisions are found, request that they be revised.  If the business on the other side responds with “take it or leave it,” this will help to avoid getting stuck in an adhesion contract.  When in doubt, have the contract reviewed by your attorney.                                                                                                                                                   

Michael T. Traxler, Esquire

MTraxler@ReagerAdlerPC.com

(717) 763-1383

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