An adhesion contract exists if the parties are of such disproportionate bargaining power that the party of weaker bargaining strength could not have negotiated for variations in the terms of the adhesion contract. Adhesion contracts are generally in the form of a standardized contract form that is entirely prepared and offered by the party of superior bargaining strength to consumers of goods and services. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit. Because adhesion contracts do not afford consumers a realistic opportunity to bargain, the consumers are often faced with adhesion contracts on a take-it-or-leave-it basis. Under such conditions, the consumer has little to no ability to negotiate more favorable terms. Instead, consumers cannot obtain the desired product or service except by acquiescing in the form contract. Courts may look at the doctrine of reasonable expectations to determine whether to strike down an adhesion contract. The doctrine of reasonable expectations states that a party who adheres to the other party’s standard terms does not assent to the terms if the other party has reason to believe that the adhering party would not have accepted the agreement if he had known that the agreement contained the particular term. In other words, people are bound by terms a reasonable person would expect to be in the contract. Courts may also look at whether the provisions are written in clear, unambiguous terms when determining whether to strike down an adhesion contract. This is based on the doctrine of unconscionability. Procedural unconscionability deals with the contract formation process and whether the bargaining process was deficient. Some factors of procedural unconscionability include duress, fraud, undue influence, and fine print. Substantive unconscionability deals with the content of the contract and whether the nature of the contract terms is oppressive. Some factors of substantive unconscionability include inflated price, unfair disclaimers, immoral clauses, and contracts that contravene public policy. Electronic Adhesion ContractsThere are three types of electronic adhesion contracts: browse-wrap, click-wrap, and sign-in-wrap. Browse-wrap contracts may require consumers to click through multiple hyperlinks to read and agree to the terms and conditions. Therefore, courts usually do not enforce browse-wrap contracts because of the procedural unconscionability of buried terms. See Jerez v. JD Closeouts, LLC, 36 Misc. 3d 161. On the other hand, courts do generally enforce click-wrap and sign-in-wrap contracts. Click-wrap contracts require that consumers click “I agree” by means of an immediately available pop-up box. See Caspi v. Microsoft Network, 323 N.J. Super. 118. Sign-in-wrap contracts include a hyperlink, often labeled as “Terms of Service” or “Terms and Conditions,” that is located by a sign-up button. Sign-in-wrap contracts require that users electronically accept the terms by clicking “I accept” or “I agree” as the last step of the sign-up process before allowing consumers to use their products or services. [Last updated in December of 2021 by the Wex Definitions Team]
A third-party beneficiary is a person or business that benefits from the terms of a contract made between two other parties. In law, a third-party beneficiary may have certain rights that can be enforced if the contract is not fulfilled. There are certain standards that need to be met for the third party beneficiary to have legal rights to enforce a contract or to share in the proceeds. In particular, the benefit to the third party must be intended, rather than incidental.
The clearest example of a third-party beneficiary is found in life insurance contracts. An individual enters into a contract with an insurance company that requires the payment of death benefits to a third party. That third party does not sign the contract and may not even be aware of its existence, yet is entitled to benefit from it. Most examples are less clear-cut. Say the owner of a new office building signs a contract with a big company to lease four floors of space. The landlord then signs a separate contract with a small business person who wants to open a coffee shop on the ground floor, promising a steady stream of customers from the big company. The big company then reneges on the deal. Now the coffee shop owner is going bust.
Third-party rights are more enforceable if the benefit was intentional and the third party was aware of it. Can the coffee shop owner demand compensation for the loss of business from the big company, based on its breach of contract with another party? As a third-party beneficiary, the coffee shop owner might or might not have a case. The company could argue that the coffee shop owner was merely an incidental beneficiary, not an intended beneficiary. That is, the company did not plan to open offices in that building with the intention of enriching a coffee shop owner. The rights of a third-party beneficiary are more clear-cut if that person or business is specifically named in the contract. In such cases, a third-party beneficiary clause is added that identifies an individual or company that expects to benefit from the agreement. This right is strengthened in law if the third-party beneficiary is aware of the agreement and the intended benefit. For example, say a parent signed a lease and made a security deposit on a rental apartment for a child to live in while attending college. The student arrives in town and is denied access to the apartment. Adding insult to injury, the apartment has been rented to someone else. The student and the parent both have the right to demand compensation for the failure of the landlord to meet the terms of the contract.
CONTRACTS: BASIC PRINCIPLES 430x • Contract: An agreement between two or more parties to perform or to refrain from some act now or in the future. A legally enforceable agreement. [4301] • Requisites for Contract Formation (Elements) 4305 • Agreement: One party must offer to enter into an agreement, and the other party must accept the terms of the offer • Consideration: Something of value received or promised, to convince a party to agree to the deal; • Contractual Capacity/ competent parties: Both parties must be competent to enter into the agreement; • Legality: The contract’s purpose must be to accomplish some goal that is legal and not against public policy; • Genuineness of Assent (Arguably part of agreement): The apparent consent of both parties must be genuine; and • Form: The agreement must be in whatever form (e.g., written, under seal, etc.) the law requires. UNILATERAL AND BILATERAL CONTRACTS [4302] • Every contract involves at least two parties -- the offeror/ promisor, who makes the offer/promise to perform, and the offeree/promisee, to whom the offer/promise is made. [4303] • Unilateral Contract: A unilateral contract arises when an offer can be accepted only by the offeree’s performance (e.g., X offers Y $15 to mow X’s yard). 4302.08 • Bilateral Contract: A bilateral contract arises when a promise is given in exchange for a promise in return (e.g., X promises to deliver a car to Y, and Y promises to pay X an agreed price). 4302.09 • Express Contract: A contract in which the terms of the agreement are fully and explicitly stated orally or in writing.[4302.01] • Implied-in-Fact Contract: A contract formed in whole or in part by the conduct (as opposed to the words) of the parties. In order to establish an implied-in-fact contract, [4302.02] (1) the plaintiff must have furnished some service or property to the defendant, (2) the plaintiff must have reasonably expected to be paid and the defendant knew or should have known that a reasonable person in the plaintiff’s shoes would have expected to be paid for the service or property rendered by the plaintiff, and (3) the defendant must have had the opportunity to reject the services or property and failed to do so. • Quasi or Implied-in-Law Contract: A fictional contract imposed on parties by a court in the interests of fairness and justice, typically to prevent the unjust enrichment of one party at the expense of the other.[4302.03] FORMAL AND INFORMAL CONTRACTS [4302.04/5] • Formal Contract: A contract that requires a special form or method of formation (creation) in order to be enforceable. • Contract Under Seal: A formalized writing with a special seal attached. • Recognizance: An acknowledgment in court by a person that he or she will perform some specified obligation or pay a certain sum if he or she fails to perform (e.g., personal recognizance bond). • Negotiable Instrument: A check, note, draft, or certificate of deposit -- each of which requires certain formalities (to be discussed later). • Letter of Credit: An agreement to pay that is contingent upon the receipt of documents (e.g., invoices and bills of lading) evidencing receipt of and title to goods shipped. • Informal Contract: A contract that does not require a specified form or method of formation in order to be valid. • The vast majority of contracts are informal (without a seal). • Executed Contract [4302.11]: A contract that has been completely performed by both (or all) parties. By contrast, • An executory contract [4302.10]is a contract that has not yet been fully performed by one or more parties. • Valid Contract [4302.13]: A contract satisfying all of the requisites discussed earlier -- agreement, consideration, capacity, legal purpose, assent, and form. By contrast, • A void contract [4302.14]is a contract having no legal force or binding effect (e.g., a contract entered into for an illegal purpose); • A voidable contract [4302.15] is an otherwise valid contract that may be legally avoided, cancelled, or annulled at the option of one of the parties (e.g., a contract entered into under duress or under false pretenses); and, • An unenforceable contract is an otherwise valid contract rendered unenforceable by some statute or law (e.g., an oral contract that, due to the passage of time, must be in writing to be enforceable). • The key to contract interpretation is to give effect to the intent of the parties as expressed in their agreement. • Intent is generally to be ascertained objectively -- by looking at (1) the words used by the parties in the agreement, (2) the actions of the parties pursuant to the agreement, and (3) the circumstances surrounding the agreement as they would be interpreted by a reasonable person -- rather than the parties’ subjective intentions (usually expressed after the fact). • The Plain Meaning Rule: When a contract is clear and unequivocal, a court will enforce it according to its plain terms, set forth on the face of the instrument, and there is no need for the court either to consider extrinsic evidence or to interpret the language of the contract. RULES OF INTERPRETATION - [4321] Know these, they show up all the time… • Rules of Interpretation: When a contract contains ambiguous or unclear terms, a court will resort to one or more of the following rules in order to determine and give effect to the parties’ intent. • Insofar as possible, the contract’s terms will be given a reasonable, lawful, and effective meaning. • The contract will be interpreted as a whole various and its various provisions will be “harmonized” to yield consistent expression of intent. • Negotiated terms will be given greater consideration than standard-form, or “boiler-plate,” terms. • A non-technical term will be given its ordinary, commonly-accepted meaning, and a technical term will be given its technical meaning, unless the parties clearly intended something else. • Specific terms will prevail over general terms. • Handwritten terms prevail over typewritten terms, which, in turn, prevail over printed terms. • When the language used in a contract has more than one meaning, any ambiguity is construed against the drafting party. • An ambiguous contract should be interpreted in light of pertinent usages of trade in the locale and/or industry, the course of prior dealing between the parties, and the parties’ course of prior performance of the contract. • Express terms are given preference over course of prior performance, which is given preference over course of dealing, which is given preference over usage of trade. • Words are given preference over numbers or symbols. |
Which of the following is a contractual party who agrees to receive something from the other party?
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